Appendix A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT made and entered into as of the 29th day
of October 1996, by and among The Lehigh Group Inc., a Delaware
corporation ("Lehigh"), Lehigh Management Corp., a Delaware corporation
and a wholly-owned subsidiary of Lehigh ("Newco") and First Medical
Corporation, a Delaware corporation ("FMC"). Unless the context indicates
otherwise, all references herein to Lehigh or FMC refer to Lehigh and FMC
and their respective wholly owned subsidiaries.
W I T N E S S E T H T H A T:
R E C I T A L S:
(A) Lehigh has recently organized Newco for the purpose of merging with and
into FMC on the terms and conditions set forth herein and with the effect that,
as a result thereof, the present stockholders of Lehigh will upon consummation
of the Merger hold four percent of the total equity of Lehigh on a fully diluted
basis.
(B) Simultaneously with the execution and delivery of this Agreement, FMC
is lending to Lehigh the sum of $300,000 and, in evidence thereof, Lehigh is
delivering to FMC a debenture in the form annexed hereto as Exhibit A.
(C) It is intended that the transactions contemplated by this Agreement
shall constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual covenants and agreements and
the benefits to be realized by each of the parties, the parties hereto agree as
follows:
1. THE MERGER
(a) On the Closing Date, Newco shall be merged with and into FMC (the
"Merger") in accordance with the provisions of the General Corporation Law of
the State of Delaware (the "DGCL"). FMC shall be the surviving corporation of
the Merger, shall be a wholly-owned subsidiary of Lehigh and shall continue to
be governed by the laws of Delaware. Immediately prior to the Effective Time (as
hereinafter defined) there shall be filed with the Delaware Secretary of State
an amendment to the Certificate of Incorporation of Lehigh providing for "blank
check" preferred stock and a Certificate of Designation establishing a series of
1,037,461 shares of preferred stock to be designated the Series A Convertible
Preferred Stock, $.001 par value, of Lehigh (the "Lehigh Preferred Stock"), each
share of which shall be convertible at any time by the holder thereof into 250
shares of the common stock, $.001 par value, of Lehigh (the "Lehigh Common
Stock") and each share of which shall be entitled to 250 votes, voting together
with the Lehigh Common Stock, on all matters subject to the vote of
stockholders. Upon the effectiveness of the Merger, and by virtue thereof
without any further action by Lehigh, FMC or any of their stockholders: (i) any
and all shares of the Lehigh Common Stock held by
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FMC immediately prior to the Effective Time shall be cancelled; (ii) each other
share of the Lehigh Common Stock issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding; and (iii) each share of
common stock, $.01 par value, of FMC (the "FMC Common Stock") shall cease to be
outstanding and shall be converted into (A) 1,127.675 shares of Lehigh Common
Stock and (B) 103.7461 shares of Lehigh Preferred Stock.
(b) Certificates representing shares of FMC Common Stock shall be exchanged
for certificates of Lehigh Common Stock and Lehigh Preferred Stock as follows:
(i) After the Effective Time, certificates evidencing outstanding
shares of FMC Common Stock shall evidence the right of the holder thereof
to receive certificates representing 1,127.675 shares of Lehigh Common
Stock and 103.7461 shares of Lehigh Preferred Stock for each share of FMC
Common Stock. Each holder of FMC Common Stock, upon surrender of the
certificates which prior thereto represented shares of FMC Common stock, to
a trust company to be designated by Lehigh which shall act as the exchange
agent (the "Exchange Agent") for such stockholders to effect the exchange
of certificates on their behalf, shall be entitled upon such surrender to
receive in exchange therefor a certificate or certificates representing the
number of whole shares of Lehigh Common Stock and Lehigh Preferred Stock
into which the shares of FMC Common Stock theretofore represented by the
certificate or certificates so surrendered shall have been converted. Until
so surrendered, each such outstanding certificate for shares of FMC Common
Stock shall be deemed, for all corporate purposes including voting rights,
subject to the further provisions of this Section 1(b), to evidence the
ownership of the whole shares of Lehigh Common Stock and Lehigh Preferred
Stock into which such shares have been converted.
(ii) No certificate representing a fraction of Lehigh Common Stock or
Lehigh Preferred Stock will be issued and no right to vote or receive any
distribution or any other right of a stockholder shall attach to any
fractional interest of Lehigh Common Stock or Lehigh Preferred Stock to
which any holder of shares of FMC Common Stock would otherwise be entitled
hereunder.
(iii) If any certificate for whole shares of Lehigh Common Stock or
Lehigh Preferred Stock is to be issued in a name other than that in which
the certificate surrendered in exchange therefor is registered, it shall be
a condition of the issuance thereof that the certificate so surrendered
shall be properly endorsed and otherwise be in proper form for transfer and
that the person requesting such exchange pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for shares of Lehigh Common Stock or Lehigh Preferred Stock in any name
other than that of the registered holder of the certificate surrendered.
(iv) At the Effective Time, all shares of FMC Common Stock which shall
then be held in its treasury, if any, shall cease to exist, and all
certificates representing such shares shall be cancelled.
(c) Lehigh and FMC shall each submit this Agreement to its stockholders for
approval in accordance with the DGCL, at an annual or special meeting of the
stockholders (the "Meeting") called and held on a date to be fixed by their
respective Boards of Directors and shall use their best efforts to hold such
meeting on or before May 15, 1997 or as soon thereafter as practical.
(d) Lehigh and FMC shall each use its best efforts to obtain the
affirmative vote of stockholders required to approve this Agreement and the
transactions contemplated hereby, and will recommend to their respective
stockholders the approval of the Merger, subject however, in the case of
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each company's Board of Directors, to its fiduciary obligation to stockholders.
Lehigh shall mail to all of its stockholders entitled to vote at and receive
notice of such meeting the material required in accordance with the Registration
Statement and Prospectus provisions specified in paragraph 9 hereof.
(e) On or before the date of the Meeting, the Board of Directors of Newco
shall duly approve this Agreement and Lehigh, as sole stockholder of Newco,
shall duly approve this Agreement and the transactions contemplated hereby.
(f) Following the approval of the Merger by the stockholders of Lehigh,
Newco and FMC, a Certificate of Merger containing the information required by
applicable law shall be executed by the appropriate officers of FMC and Newco.
(g) Notwithstanding any other provision of this Agreement to the contrary,
if Lehigh receives a proposal for a business combination with any other party
which is more favorable to Lehigh or its stockholders than the terms set forth
in this Agreement (an "Alternate Proposal") at any time prior to consummation of
the Merger, Lehigh shall be entitled to pursue and/or consummate such
transaction free of any obligation to FMC under or pursuant to this Agreement
except for those obligations set forth in Section 17 hereof.
2. CLOSING; EFFECTIVE TIME
(a) The closing of all the transactions contemplated hereby (herein called
the "Closing" or the "Closing Date") shall occur at a date and place mutually
agreed between the parties and on a date within fifteen (15) business days after
all of the of the conditions described in paragraphs 14 and 15 hereof have been
satisfied or, to the extent permitted by paragraph 16(c) hereof, their
satisfaction has been waived. Lehigh, Newco and FMC will use their best efforts
to obtain the approvals specified in paragraph 8 hereof and any other of the
consents, waivers, or approvals necessary or desirable to accomplish the
transactions contemplated by this Agreement. All documents required to be
delivered by each of the parties hereto shall be duly delivered to the
respective recipient thereof at or prior to the Closing. Without the consent of
FMC and Lehigh to extend such date, the Closing Date shall be no later than June
30, 1997, and if it is delayed beyond said date, or extended date, then either
party shall have the right to terminate this Agreement upon notice to that
effect.
(b) At the Closing, Lehigh, Newco and FMC shall jointly direct that the
Certificate of Merger be duly filed, and in accordance with such direction it
shall be filed, in the Offices of the Secretary of State of Delaware so that the
Merger shall be effective on the Closing Date. The time at which the Merger
becomes effective is referred to herein as the "Effective Time."
3. LISTING
At a time mutually agreed to by Lehigh and FMC, but in no event later than
the date following the approval of stockholders of both Lehigh and FMC, Lehigh
agrees, at its expense, to apply for and use its best efforts to obtain
additional listings on the New York Stock Exchange, subject to notice of
issuance, of the shares of Lehigh Common Stock to be delivered to FMC
stockholders in the Merger. FMC agrees to render assistance to Lehigh in
obtaining such listing, including the furnishing of such financial statements as
Lehigh may reasonably request.
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4. INVESTIGATION BY THE PARTIES
Lehigh and FMC acknowledge that they have made or caused to be made such
investigation of the properties of the other and its subsidiaries and of its
financial and legal condition as the party making such investigation deems
necessary or advisable to familiarize itself with such properties and other
matters. Lehigh and FMC each agree that if matters come to the attention of
either party requiring additional due diligence, each agrees to permit the other
and its authorized agents or representatives to have, after the date of
execution hereof, full access to its premises and to all of its books and
records at reasonable hours, and its subsidiaries and officers will furnish the
party making such investigation with such financial and operating data and other
information with respect to the business and properties of it and its
subsidiaries as the party making such investigation shall from time to time
reasonably request. No investigation by Lehigh or FMC shall affect the
representations and warranties of the other and each such representation and
warranty shall survive any such investigation. Each party further agrees that in
the event the transactions contemplated by this Agreement shall not be
consummated, it and its officers, employees, accountants, attorneys, engineers,
authorized agents and other representatives will not disclose or make available
to any other person or use for any purpose unrelated to the consummation of this
Agreement any information, whether written or oral, with respect to the other
party and its subsidiaries or their business which it obtained pursuant to this
Agreement. Such information shall remain the property of the party providing it
and shall not be reproduced or copied without the consent of such party. In the
event that the transactions contemplated by this Agreement shall not be
consummated, all such written information shall be returned to the party
providing it.
5. "AFFILIATES" OF FMC
Each stockholder of FMC who is, in the opinion of counsel to Lehigh, deemed
to be an "affiliate" of FMC as such term is defined in the rules and regulations
of the Securities and Exchange Commission under the Securities Act of 1933, as
amended (hereinafter called the "1933 Act"), is listed on a Schedule to be
delivered to Lehigh within 20 days hereof, and will be informed by FMC that: (i)
absent an applicable exemption under the 1933 Act, the shares of Lehigh Common
Stock to be received by such "affiliate" and owned beneficially on consummation
of the transactions contemplated hereunder may be offered and sold by him only
pursuant to an effective registration statement under the 1933 Act or pursuant
to the provisions of paragraph (d) of Rule 145 promulgated under the 1933 Act;
(ii) Rule 145 restricts the amount and method of subsequent dispositions by such
"affiliate" of such shares and (iii) a continuity of interests by the
"affiliate" must be maintained. Prior to the Closing Date, FMC agrees to obtain
from each "affiliate" an agreement to the effect that such affiliate will not
publicly sell any of such shares unless a registration statement under the 1933
Act with respect thereto is then in effect, or such disposition complies with
paragraph (d) of Rule 145 promulgated under the 1933 Act, or counsel
satisfactory to Lehigh has delivered a written opinion to Lehigh and to such
"affiliate" that registration under the 1933 Act is not required in connection
with such disposition.
6. STATE SECURITIES LAWS
Lehigh will take such steps as may be necessary to comply with any state
securities or so-called Blue Sky laws applicable to the actions to be taken in
connection with the Merger and the delivery by Lehigh to FMC stockholders of the
shares of Lehigh Common Stock and Lehigh Preferred Stock to be delivered
pursuant to this Agreement. Costs and expenses of any such Blue-Sky
qualifications shall be borne by Lehigh.
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7. CONDUCT OF BUSINESS PENDING THE CLOSING
From the date hereof, to and including the Closing Date, except as may be
first approved by the other Party or as is otherwise permitted or contemplated
by this Agreement:
(i) Lehigh and FMC shall each conduct their business only in the usual
and ordinary course;
(ii) neither Lehigh or FMC shall make any change in its authorized or
outstanding capitalization;
(iii) Except as set forth on their respective Disclosure Schedules
annexed to this Agreement neither Lehigh or FMC shall authorize for
issuance or issue or enter any agreement or commitment for the issuance of
shares of capital stock;
(iv) neither Lehigh or FMC shall create or grant any rights or
elections to purchase stock under any employee stock bonus, thrift or
purchase plan or otherwise;
(v) neither Lehigh or FMC shall amend their Certificates of
Incorporation or Bylaws unless deemed to be reasonably necessary to
consummate the transaction contemplated herein and upon prior notice
thereof to each other;
(vi) Neither Lehigh or FMC shall make any modification in their
employee benefit programs or in their present policies in regard to the
payment of salaries or compensation to their personnel and no increase
shall be made in the compensation of their personnel, except in the
ordinary course of business;
(vii) Neither Lehigh or FMC shall make any contract, commitment, sale
or purchase of assets or incur debt, except in the ordinary course of
business;
(viii) Lehigh and FMC will use all reasonable and proper efforts to
preserve their respective business organizations intact, to keep available
the services of their present employees and to maintain satisfactory
relationships with suppliers, customers, regulatory agencies, and others
having business relations with it;
(ix) Neither Lehigh or FMC shall create or implement a profit sharing
plan; and,
(x) The Board of Directors of Lehigh and FMC will not declare any
dividends on, or otherwise make any distribution in respect of, their
outstanding shares of capital stock.
8. EFFORTS TO OBTAIN APPROVALS AND CONSENTS
FMC and Lehigh will use all reasonable and proper efforts to obtain, where
required, the approval and consent (i) of any governmental authorities having
jurisdiction over the transactions contemplated in this Agreement, and (ii) of
such other persons whose consent to the transactions contemplated by this
Agreement is required.
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9. PROXY STATEMENT AND REGISTRATION STATEMENT
(a) FMC and Lehigh agree that they shall cooperate in the preparation of
and the filing with the Securities and Exchange Commission by Lehigh of a proxy
statement/prospectus (the "Proxy Statement") in accordance with the Securities
Exchange Act of 1934 (the "1934 Act") and the applicable rules and regulations
thereunder, to be included in the registration statement of Lehigh referred to
below and (ii) the filing with the Securities and Exchange Commission, by
Lehigh, of a registration statement on Form S-4 or such other Form as may be
appropriate (the "Registration Statement"), including the Lehigh Proxy
Statement, in accordance with the Securities Act of 1933 (the "1933 Act") and
the applicable rules and regulations thereunder covering the shares of Lehigh
Common Stock and Lehigh Preferred Stock to be issued pursuant to this Agreement
and the shares of Lehigh Common Stock issuable upon conversion of the Lehigh
Preferred Stock. Lehigh and FMC thereafter shall use all reasonable efforts to
cause the Registration Statement to become effective under the 1933 Act at the
earliest practicable date, and shall take such actions as may reasonably be
required under applicable state securities laws to permit the transactions
contemplated by this Agreement. Lehigh shall advise FMC promptly when the
Registration Statement has become effective, and Lehigh shall thereupon send a
Proxy Statement to its stockholders for purposes of the Meeting contemplated by
this Agreement. The Proxy Statement shall be mailed not less than 20 days prior
to such meeting to all stockholders of record at their address of record on the
transfer records of Lehigh. Each party shall bear their respective out of pocket
expenses, and expenses related to preparing documents, financial statements,
schedules, exhibits, and like materials for inclusion in the Registration
Statement. Lehigh shall be responsible for the expenses of filing the
Registration Statement.
(b) Subject to the conditions set forth below, the parties agree to
indemnify and hold harmless each other, their respective officers, directors,
partners, employees, agents and counsel against any and all loss, liability,
claim, damage, and expense whatsoever (which shall include, for all purposes of
this Section 9, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with (i) any untrue statement or
alleged untrue statement of a material fact made by the party against whom
indemnification is sought and contained (1) in any Prospectus/Proxy Statement,
the Registration Statement, or Proxy Statement (as from time to time amended and
supplemented) or any amendment or supplement thereto; or (2) in any application
or other document or communication (in this Section 9 collectively called an
"application") executed by or on behalf of either party or based upon written
information filed in any jurisdiction in order to qualify the shares of Lehigh
Common Stock and Lehigh Preferred Stock to be issued in connection with the
Merger and the shares of Lehigh Common Stock issuable upon conversion of the
Lehigh Preferred Stock under the "Blue Sky" or securities laws thereof or filed
with the Securities and Exchange Commission or any securities exchange; or any
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; unless such
statement or omission was made in reliance upon and in conformity with written
information furnished to the indemnifying party from the party seeking
indemnification expressly for inclusion in any Prospectus/Proxy Statement, the
Registration Statement, or Proxy Statement, or any amendment or supplement
thereto, or in any application, as the case may be, or (ii) any breach of
representation, warranty, covenant, or agreement contained in this Agreement.
The foregoing agreement to indemnify shall be in addition to any liability each
party may otherwise have, including liabilities arising under this Agreement. If
any action is brought against either party or any of its officers, directors,
partners, employees, agents, or counsel ( an "indemnified party") in respect of
which indemnity may be sought pursuant to the foregoing paragraph,
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such indemnified party or parties shall promptly notify the other party (the
"indemnifying party") in writing of the institution of such action (but the
failure to so notify shall not relieve the indemnifying party from any liability
it may have other than pursuant to this Paragraph 9(b)) and the indemnifying
party shall promptly assume the defense of such action, including the employment
of counsel and payment of expenses (satisfactory to such indemnified party or
parties). Such indemnified party or parties shall have the right to employ its
or their own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or the
indemnifying party shall not have promptly employed counsel satisfactory to such
indemnified party or parties to have charge of the defense of such action or
such indemnified party or parties shall have reasonably concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from or additional to those available to the other
party in any of which events such fees and expenses shall be borne by the
indemnifying party and the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties.
Anything in this paragraph to the contrary notwithstanding, the indemnifying
party shall not be liable for any settlement of any such claim or action
effected without its written consent.
10. COOPERATION BETWEEN PARTIES
FMC and Lehigh shall fully cooperate with each other and with their
respective counsel and accountants in connection with any steps required to be
taken as part of their obligations under this Agreement, including the
preparation of financial statements and the supplying of information in
connection with the preparation of the Registration Statement and the Proxy
Statement.
11. REPRESENTATIONS OF LEHIGH
Lehigh represents, warrants and agrees that:
(a) Lehigh is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and it subsidiaries are duly
organized, validly existing and in good standing under the laws of the
jurisdiction pursuant to which they were incorporated. Lehigh and its
subsidiaries have the corporate power and any necessary governmental authority
to own or lease their properties now owned or leased and to carry on their
business as now being conducted. Lehigh and its subsidiaries are duly qualified
to do business and in good standing in every jurisdiction in which the nature of
their business or the character of their properties makes such qualification
necessary.
(b) As of the date hereof, the authorized capital stock of Lehigh consists
of 100,000,000 shares of Lehigh Common Stock, of which 11,276,250 shares are
issued and outstanding, and 5,000,000 shares of preferred stock, $.001 par
value, none of which is issued and outstanding. As of the date hereof, there are
options and warrants outstanding to purchase 18,697,187 shares of Lehigh Common
Stock. The outstanding capital stock of Lehigh and its subsidiaries has been
duly authorized and issued and is fully paid and nonassessable. Except for the
foregoing, Lehigh and its subsidiaries have no commitment to issue, nor will
they issue, any shares of their capital stock or any securities or obligations
convertible into or exchangeable for, or give any person any right to acquire
from Lehigh or its subsidiaries, any shares of Lehigh's or it subsidiaries'
capital stock. Lehigh owns all of the issued and outstanding capital stock of
Newco.
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(c) The shares of Lehigh Common Stock and Lehigh Preferred Stock which are
to be issued and delivered to the FMC stockholders pursuant to the terms of this
Agreement, when so issued and delivered, will be validly authorized and issued
and will be fully paid and nonassessable. Lehigh shall have applied for and
shall use its best efforts to obtain approval for listing such shares of Lehigh
Common Stock subject to notice of issuance on the New York Stock Exchange prior
to the Effective Time, and no stockholder of Lehigh or other person will have
any preemptive rights in respect thereto.
(d) Lehigh has furnished FMC with copies of its Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 1995 which contains consolidated balance sheets of Lehigh and subsidiaries
as of December 31, 1995 and 1994 and the related consolidated statements of
operations, stockholders equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1995 audited by BDO Seidman, LLP. Lehigh
has also furnished FMC with unaudited financial statements as of June 30, 1996
as set forth in its Form 10-Q as filed with the Securities and Exchange
Commission. All of the above financial statements present fairly the
consolidated financial position of Lehigh and its subsidiaries at the periods
indicated, and the consolidated results of operations and cash flows for the
periods then ended. The interim financial statements have been prepared in
conformity with generally accepted accounting principles applied on a consistent
basis, and in the opinion of Lehigh include all adjustments (consisting of
normal recurring accruals) necessary for a fair presentation of such interim
period. Since June 30, 1996 there has been no material adverse change in the
assets or liabilities or in the business or condition, financial or otherwise,
of Lehigh or its consolidated subsidiaries, and no change except in the ordinary
course of business or as contemplated by this Agreement.
(e) Except as disclosed in the public filings of Lehigh and except for the
lawsuit filed by Southwicke Corporation a copy of the complaint in which is
annexed hereto, neither Lehigh nor any of its subsidiaries is (i) engaged in or
a party to, or to the knowledge of Lehigh, threatened with any material legal
action or other proceeding before any court or administrative agency or (ii) to
the knowledge of Lehigh, has been charged with, or is under investigation with
respect to, any charge concerning any presently pending material violation of
any provision of Federal, state, or other applicable law or administrative
regulations in respect to its business.
(f) Lehigh and Newco have the corporate power to enter into this Agreement
and, subject to requisite stockholder approval, the execution and delivery and
performance of this Agreement have been duly authorized by all requisite
corporate action and this Agreement constitutes the valid and binding
obligations of Lehigh and Newco.
(g) The execution and carrying out of this Agreement and compliance with
the terms and provisions hereof by Lehigh and Newco will not conflict with or
result in any breach of any of the terms, conditions, or provisions of, or
constitute a default under, or result in the creation of, any lien, charge, or
encumbrance upon any of the properties or assets of Lehigh, Newco or any of its
other subsidiaries pursuant to any corporate charter, indenture, mortgage,
agreement (other than that which is created by virtue of this Agreement) or
other instrument to which Lehigh or any of its subsidiaries is a party or by
which it or any of its subsidiaries if bound or affected.
(h) This Agreement and the documents and financial statements furnished
hereunder on behalf of Lehigh do not contain and will not contain any untrue
statement of a material fact nor omit to state a material fact necessary to be
stated in order to make the statements contained herein and therein not
misleading; and there is no fact known to Lehigh which materially adversely
affects or in the future
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will materially adversely affect the business operations, affairs or condition
of Lehigh or any of its subsidiaries or any of its or their properties or assets
which has not been set forth in this Agreement or any documents or materials
furnished hereunder.
(i) There are no agreements or contracts between Lehigh and its
subsidiaries with any other third party that require approvals or consents that
could delay or prevent the Merger of Lehigh and Newco and the other transactions
contemplated thereby.
(j) Neither Lehigh nor any of its subsidiaries uses or handles potentially
hazardous materials and have not received notification of, and are not aware of,
any past or present event, condition or activity of or relating to the business,
properties or assets of Lehigh which violates any Environmental or Occupational
Safety Law.
12. REPRESENTATIONS OF FMC
FMC represents, warrants and agrees that:
(a) FMC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and its subsidiaries are duly
organized, validly existing and in good standing under the laws of the
jurisdiction pursuant to which they were incorporated. FMC and its subsidiaries
have the corporate power and any necessary governmental authority to own or
lease their properties now owned or leased and to carry on their business as now
being conducted. FMC and its subsidiaries are duly qualified to do business and
in good standing in every jurisdiction in which the nature of their business or
the character of their properties makes such qualification necessary.
(b) The authorized capital stock of FMC consists of 15,000 shares of FMC
Common Stock, of which 10,000 shares are issued and outstanding. The outstanding
capital stock, of FMC and its subsidiaries has been duly authorized and issued
and is fully paid and nonassessable. FMC and its subsidiaries have no commitment
to issue, nor will they issue, any shares of their capital stock or any
securities or obligations convertible into or exchangeable for, or give any
person any right to acquire from FMC or its subsidiaries any shares of FMC or it
subsidiaries capital stock, except for those rights identified in the Disclosure
Schedule of FMC annexed hereto (the "FMC Disclosure Schedule").
(c) FMC has furnished Lehigh with copies of the unaudited consolidated
balance sheet of FMC and subsidiaries as of June 30, 1996 and the related
consolidated statements of operations, shareholder equity (deficit) and cash
flows for the six months ended June 30, 1996, and the consolidated balance
sheets of MedExec, Inc., a principal operating subsidiary of FMC, and its
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, stockholder equity (deficit) and cash flows for each
of the two years in the period ended December 31, 1995 audited by KPMG Peat
Marwick. All of the above financial statements present fairly the consolidated
financial position of FMC and its subsidiaries at the periods indicated, and the
consolidated results of operations and cash flows for the periods then ended.
The interim financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis, and in the opinion
of FMC include all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of such interim period. Since June 30, 1996
there has been no material adverse change in the assets or liabilities or in the
business or condition, financial or otherwise, of FMC or its consolidated
subsidiaries, and no change except in the ordinary course of business or as
contemplated by this Agreement.
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(d) Neither FMC nor any of its subsidiaries is engaged in or a party to, or
to the knowledge of FMC, threatened with any material legal action or other
proceeding before any court or administrative agency except as set forth in the
FMC Disclosure Schedule to be furnished to Lehigh. Neither FMC nor any of its
subsidiaries, to the knowledge of FMC, has been charged with, or is under
investigation with respect to, any charge concerning any presently pending
material violation of any provision of Federal, state, or other applicable law
or administrative regulations in respect to its business except as set forth on
said FMC Disclosure Schedule.
(e) The information to be furnished by FMC for use in the material mailed
to stockholders of FMC in connection with the Meetings will in all material
respects comply with the applicable requirement of the 1933 Act and the 1934
Act, and the rules and regulations promulgated thereunder.
(f) FMC has the corporate power to enter into this Agreement, the execution
and delivery and performance of this Agreement have been duly authorized by all
requisite corporate action, and this Agreement constitutes the valid and binding
obligations of FMC.
(g) The execution and carrying out of this Agreement and compliance with
the terms and provisions hereof by FMC will not conflict with or result in any
breach of any of the terms, conditions, or provisions of, or constitute a
default under, or result in the creation of, any lien, charge, or encumbrance
upon any of the properties or assets of FMC or any of its other subsidiaries
pursuant to any corporate charter, indenture, mortgage, agreement (other than
that which is created by virtue of this Agreement) or other instrument to which
FMC or any of its subsidiaries is a party or by which it or any of its
subsidiaries if bound or affected.
(h) This Agreement, the FMC Disclosure Schedule and all documents and
financial statements furnished hereunder on behalf of FMC do not contain and
will not contain any untrue statement of a material fact nor omit to state a
material fact necessary to be stated in order to make the statements contained
herein and therein not misleading; and there is no fact known to FMC which
materially adversely affects or in the future will materially adversely affect
the business operations, affairs or condition of FMC or any of its subsidiaries
or any of its or their properties or assets which has not been set forth in this
Agreement the FMC Disclosure Schedule or other documents and material furnished
hereunder.
(i) There are no agreements or contracts between FMC and its subsidiaries
with any other third party that require approvals or consents that could delay
or prevent the Merger of FMC and Newco and the other transactions contemplated
thereby.
(j) Neither FMC nor any of its subsidiaries uses or handles potentially
hazardous materials other than those customarily handled by medical clinics of
the type managed by FMC, and have not received notification of, and are not
aware of, any past or present event, condition or activity of or relating to the
business, properties or assets of FMC which violates any Environmental or
Occupational Safety Law.
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13. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The representations and warranties made herein by FMC and Lehigh shall not
survive, and shall expire with and be terminated upon, the Closing of the
Merger.
14. CONDITIONS TO THE OBLIGATIONS OF LEHIGH
The obligations of Lehigh hereunder are subject to the satisfaction on or
before the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite vote of stockholders of Lehigh and FMC.
(b) Each "affiliate" of FMC will have properly executed and delivered the
Affiliate's Agreement described in paragraph 5 hereof.
(c) FMC shall have furnished Lehigh with (i) certified copies of
resolutions duly adopted by the holders of a majority or more of the issued and
outstanding shares of FMC common stock entitled to vote, evidencing approval of
this Agreement and the transactions contemplated hereby; (ii) certified copies
of resolutions duly adopted by the Board of Directors of FMC approving the
execution and delivery of this Agreement and authorizing all necessary or proper
corporate action, to enable FMC to comply with the terms hereof and thereof;
(iii) an opinion dated the closing date of counsel for FMC in form and substance
satisfactory to Lehigh and its counsel to the effect that:
(1) FMC and each of its subsidiaries are corporations duly organized
and validly existing and in good standing under the laws of its respective
jurisdiction of incorporation, and to the best of the knowledge of such
counsel based on inquiries of responsible officers of FMC, is duly
qualified to do business and is in good standing in every jurisdiction in
which the nature of their business or the character of their properties
makes such qualification necessary, except where the failure to be so
qualified will not have a material adverse effect on FMC's business or
consolidated financial condition, and has all corporate and other power and
authority, including all governmental licenses and authorizations,
necessary to own its properties and to carry on its business as described
in the Proxy Statement;
(2) this Agreement has been duly authorized and executed by proper
corporate action of FMC and constitutes the valid and legally binding
obligation of FMC in accordance with its terms.
(3) no provision of the Certificate of Incorporation or the By-laws of
FMC or of any contract (except those pursuant to which waivers or consents
have been obtained) known to such counsel to which FMC is a party, or any
law, rule or regulation prevents it from carrying out the transactions
contemplated hereby.
(4) there is no material action or proceeding known to such counsel,
pending or threatened against FMC before a court or other governmental body
or instituted or threatened by any public authority or by the holders of
any securities of FMC, other than as specifically set forth in the FMC
Disclosure Schedule.
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(5) FMC has adequate title, subject only to liens and other matters
set forth on the financial statements furnished to Lehigh pursuant to
paragraph 12(c) hereof, to all its real estate properties, except for any
lien of taxes not yet delinquent or being contested in good faith by
appropriate proceedings and easements and restrictions of record which do
not materially adversely affect the use of the property by FMC, and except
for minor defects in titles, none of which, based upon information
furnished by officers of FMC, does or will materially adversely affect
FMC's use of such properties or its operations, and to which the rights of
FMC therein have not been questioned. In giving such opinion, counsel may
rely upon title policies previously issued to FMC or updated certificates
furnished by title insurance companies.
(6) to the best knowledge of such counsel and based upon inquiries of
responsible officers of FMC and upon searches of Uniform Commercial Code
filings in the offices of the appropriate Secretary of State, there are no
liens against properties of FMC (excluding real estate) except as disclosed
by FMC to Lehigh in the FMC Disclosure Schedule.
In rendering its opinion, FMC counsel may rely as to factual matters on
statements of officers of FMC. In rendering this opinion with respect to the
laws of any jurisdiction other than Delaware, FMC counsel may rely on the
opinion of other counsel retained by FMC provided that said opinion shall state
that Lehigh is justified in relying on the opinion or opinions of such other
counsel.
(d) The representations and warranties of FMC contained in this Agreement
shall be true in all material respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date, except for changes permitted by this Agreement or those
incurred in the ordinary course of business and FMC shall have received from FMC
at the Closing a certificate dated the Closing Date of the Chairman, President
or a Vice President of FMC to that effect.
(e) Each and all of the respective agreements of FMC to be performed on or
before the Closing Date pursuant to the terms hereof shall in all material
respects have been duly performed and FMC shall have delivered to FMC a
certificate dated the Closing Date, of the Chairman, President or a Vice
President of FMC to that effect.
(f) The completion of Lehigh's Proxy Statement and the effectiveness of
Lehigh's Registration Statement on Form S-4, as each may be amended.
(g) The approval of this Agreement by the FMC Board of Directors.
(h) The absence of any material contingent liabilities of FMC not
previously disclosed to Lehigh.
(i) The nonexistence of any agreement or contract that could delay or
prevent the completion of the transactions contemplated by this Agreement.
15. CONDITIONS TO THE OBLIGATIONS OF FMC
The obligations of FMC hereunder are subject to the satisfaction on or
before the Closing Date of the following conditions:
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(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite vote of stockholders of Lehigh and FMC.
(b) Lehigh shall have furnished FMC with (i) certified copies of
resolutions duly adopted by a majority of the holders of the issued and
outstanding shares of Lehigh Common Stock validly present at a meeting,
evidencing approval of this Agreement and the transactions contemplated hereby;
(ii) certified copies of resolutions duly adopted by the Board of Directors of
Lehigh approving the execution and delivery of this Agreement and authorizing
all necessary or proper corporate action, to enable Lehigh to comply with the
terms hereof and thereof; (iii) an opinion dated the closing date of counsel for
Lehigh in form and substance satisfactory to FMC and its counsel to the effect
that:
(1) Lehigh and each of its subsidiaries are corporations duly
organized and validly existing and in good standing under the laws of its
respective jurisdiction of incorporation, and to the best of the knowledge
of such counsel based on inquiries of responsible officers of Lehigh, is
duly qualified to do business and is in good standing in every jurisdiction
in which the nature of their business or the character of their properties
makes such qualification necessary, except where the failure to be so
qualified will not have a material adverse effect on Lehigh's business or
consolidated financial condition, and has all corporate and other power and
authority, including all governmental licenses and authorizations,
necessary to own its properties and to carry on the business as described
in the Proxy Statement of Lehigh made a part of the Proxy Statement.
(2) this Agreement has been duly authorized and executed by proper
corporate action of Lehigh and constitutes the valid and legally binding
obligation of Lehigh in accordance with its terms.
(3) no provision of the Certificate of Incorporation or the By-laws of
Lehigh or of any contract (except those pursuant to which waivers or
consents have been obtained) known to such counsel to which Lehigh is a
party, or any law, rule or regulation prevents it from carrying out the
transactions contemplated hereby.
(4) there is no material action or proceeding known to such counsel,
pending or threatened against Lehigh before a court or other governmental
body or instituted or threatened by any public authority or by the holders
of any securities of Lehigh, other than as specifically set forth in the
Disclosure Schedule.
(5) Lehigh has adequate title, subject only to liens and other matters
set forth on the financial statements furnished to FMC pursuant to
paragraph 11(d) hereof, to all its real estate properties, except for any
lien of taxes not yet delinquent or being contested in good faith by
appropriate proceedings and easements and restrictions of record which do
not materially adversely affect the use of the property by Lehigh, and
except for minor defects in titles, none of which, based upon information
furnished by officers of Lehigh, does or will materially adversely affect
Lehigh's use of such properties or its operations, and to which the rights
of Lehigh therein have not been questioned. In giving such opinion, counsel
may rely upon title policies previously issued to Lehigh or updated
certificates furnished by title insurance companies.
(6) to the best knowledge of such counsel and based upon inquiries of
responsible officers of Lehigh and upon searches of Uniform Commercial Code
filings in the offices of the
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appropriate Secretary of State, there are no liens against properties of
Lehigh (excluding real estate) except as to be disclosed in the Disclosure
Schedule.
In rendering its opinion, Lehigh counsel may rely as to factual matters on
statements of officers of Lehigh. In rendering this opinion with resect to the
laws of any jurisdiction other than Delaware, Lehigh counsel may rely on the
opinion of other counsel retained by Lehigh provided that said opinion shall
state that Lehigh is justified in relying on the opinion or opinions of such
other counsel.
(c) The representations and warranties of Lehigh contained in this
Agreement shall be true in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date, except for changes permitted by this Agreement or those
incurred in the ordinary course of business and FMC shall have received from
Lehigh at the Closing a certificate dated the Closing Date of the President or a
Vice President of Lehigh to that effect.
(d) Each and all of the respective agreements of Lehigh to be performed on
or before the Closing Date pursuant to the terms hereof shall in all material
respects have been duly performed and Lehigh shall have delivered to FMC a
certificate dated the Closing Date, of the Chairman, President or a Vice
President of Lehigh to that effect.
(e) The completion of Lehigh's Proxy Statement and the effectiveness of
Lehigh's Registration Statement on Form S-4, as each may be amended.
(f) The approval of this Agreement by the Lehigh Board of Directors.
(g) The absence of any material contingent liabilities of Lehigh not
previously disclosed to FMC.
(h) The nonexistence of any agreement or contract that could delay or
prevent the completion of the transactions contemplated by this Agreement.
16. TERMINATION AND MODIFICATION OF RIGHTS
(a) This Agreement (except for the last three sentences of paragraph 4 of
this Agreement and paragraph 17 of this Agreement) may be terminated at any time
prior to the Closing Date by (i) mutual consent of the parties hereto authorized
by their respective Boards of Directors or (ii) upon written notice to the other
party, by either party upon authorization of its Board of Directors:
(1) if in its reasonably exercised judgment since the date of this
Agreement there shall have occurred a material adverse change in the
financial condition or business of the other party or the other party shall
have suffered a material loss or damage to any of its property or assets,
which change, loss or damage materially affects or impairs the ability of
the other party to conduct its business, or if any previously undisclosed
condition which materially adversely affects the earning power or assets of
either party come to the attention of the other party; or
(2) if any action or proceeding shall have been instituted or
threatened before a court or other governmental body or by any public
authority to restrain or prohibit the transactions
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contemplated by this Agreement or if the consummation of such transactions
would subject either of such parties to liability for breach of any law or
regulation.
(b) As provided in paragraph 2(a), this Agreement may be terminated by
either party upon notice to the other in the event the Closing shall not be held
by June 30, 1997.
(c) Any term or condition of this Agreement may be waived at any time by
the party hereto which is entitled to the benefit thereof, by action taken by
the Board of Directors of such party; and any such term or condition may be
amended at any time, by an agreement in writing executed by the Chairman of the
Board, the President or any Vice President of each of the parties pursuant to
authorization by their respective Boards of Directors provided however that no
amendment of any principal term of the Merger shall be affected after approval
of this Agreement by the stockholders of Lehigh, FMC and Newco unless such
amendment is approved by such stockholders in accordance with applicable law.
17. BREAK-UP FEE
In the event that Lehigh receives and consummates an Alternate Proposal (as
that term is defined in paragraph 1(g) hereof), then Lehigh shall pay FMC
$1,500,000 by wire transfer of immediately available funds at the date of
consummation of such Alternate Proposal.
18. BROKERS
Each of the parties represents that no broker, finder or similar person has
been retained or paid and that no brokerage fee or other commission has been
agreed to be paid for or on account of this Agreement other than Gruntal &
Company and First Union.
19. GOVERNING LAW
This Agreement shall be construed in accordance with the laws of the State
of Delaware.
20. NOTICES
All notices, requests, demands and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered by hand or when mailed by registered or certified mail,
postage prepaid, or when given by telex or facsimile transmission (promptly
confirmed in writing), as follows:
(a) If to Lehigh or Newco:
Salvatore J. Zizza, President
810 Seventh Avenue - #27 F
New York, NY 10019
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With a copy to:
Robert A. Bruno, Esq.
General Counsel & Vice President
810 Seventh Avenue - #27 F
New York, NY 10019
and
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, NY 10022
Attn: Ilan K. Reich, Esq.
(b) If to FMC:
Dennis Sokol
Chairman
First Medical Corporation
1055 Washington Boulevard
Stamford, CT 06901
and
Greenberg Traurig
1221 Brickell Avenue
Miami, Florida 33131
Attn: Gary Epstein, Esq.
21. NON-ASSIGNMENT
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement nor any of the rights interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
22. COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
and by the different parties hereto on separate counterparts each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
23. HEADINGS AND REFERENCES
The headings of the paragraphs of this Agreement are inserted for
convenience of reference only.
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24. ENTIRE AGREEMENT; SEVERABILITY
This Agreement, including the Disclosure Schedules, documents referred to
herein which form a part hereof, contains the entire understanding of the
parties hereto in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter. A determination that any portion of this
Agreement is unenforceable or invalid shall not affect the enforceability or
validity of any of the remaining portions of this Agreement or this Agreement as
a whole.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto by their respective officers thereunto duly authorized by a majority of
their directors as of the date first above written.
ATTEST: THE LEHIGH GROUP INC.
By /s/ Salvatore J. Zizza
-------------------------
AUTHORIZED OFFICER Salvatore J. Zizza,
Chairman of the Board and
Chief Executive Officer
ATTEST: FIRST MEDICAL CORPORATION
By /s/ Dennis A. Sokol
-------------------------
AUTHORIZED OFFICER Dennis A. Sokol, Chairman
ATTEST: LEHIGH MANAGEMENT CORP.
By /s/ Salvatore J. Zizza
-------------------------
AUTHORIZED OFFICER Salvatore J. Zizza, President and
Chief Executive Officer
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Appendix B
CERTIFICATE OF DESIGNATION
OF
SERIES A CONVERTIBLE
PREFERRED STOCK
OF
THE LEHIGH GROUP INC.
(Pursuant to Section 151 of the
General Corporation Law of the State of Delaware)
The Lehigh Group Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Corporation:
RESOLVED, that, pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation (the "Board of Directors") by the
provisions of the Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation"), there hereby is created, out of the 5,000,000
shares of Preferred Stock of the Corporation authorized in Article FOURTH of the
Certificate of Incorporation (the "Preferred Stock"), a series of the Preferred
stock consisting of 1,037,461 shares, which series shall have the following
powers, designations, preferences and relative, participating, optional or other
rights, and the following qualifications, limitations and restrictions (in
addition to the powers, designations, preferences, participations and
restrictions set forth in the Certificate of Incorporation which are applicable
to the Preferred Stock):
Section 1. Designation and Amount.
The shares of such series shall be designated as "Series A Convertible
Preferred Stock" (the "Series A Preferred Stock") and the authorized number of
shares constituting such series shall be 1,037,461. The par value of the Series
A Preferred Stock shall be $.001 per share.
Section 2. Dividends.
The holders of shares of the Series A Preferred Stock shall be entitled to
receive, when, as and if dividends are declared by the Board of Directors on the
Corporation's Common Stock, $.001 par value (the "Common Stock"), out of funds
of the Corporation legally available therefor, cash dividends in an amount per
share of Series A Preferred Stock equal to two hundred and fifty times the
amount declared with respect to each share of the Common Stock. Each such
dividend shall be paid to the holders of record of the shares of the Series A
Preferred Stock as they appear on the stock records of the Corporation on the
record date for payment of the corresponding dividend on the Common Stock.
Section 3. Voting Rights.
The holders of Series A Preferred Stock shall be entitled to vote, together
with the holders of Common Stock, on all matters as to which holders of the
Common Stock shall be entitled to vote, with the holders of Series A Preferred
Stock being entitled to cast two hundred and fifty votes for each share
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of Series A Preferred Stock held by them. The holders of Series A Preferred
Stock shall not be entitled to vote separately, as a class, on any matter except
(a) as provided in Section 7 and (b) as required by law.
Section 4. Liquidation Rights.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, whether voluntary or otherwise, after payment or
provision for payment of the debts and other liabilities of the Corporation, the
holders of shares of the Series A Preferred Stock shall be entitled to receive,
in cash, out of the remaining net assets of the Corporation, the amount of $.01
for each share of the Series A Preferred Stock held by them, plus an amount
equal to all dividends accrued and unpaid on each such share up to the date
fixed for distribution, before any distribution shall be made to the holders of
shares of Common Stock. If upon any liquidation, dissolution or winding up of
the Corporation, the assets distributable among the holders of shares of the
Series A Preferred Stock are insufficient to permit the payment in full to the
holders of all such shares of all preferential amounts payable to all such
holders, then the entire assets of the Corporation thus distributable shall be
distributed ratably among the holders of the shares of the Series A Preferred
Stock in proportion to the respective amounts that would be payable per share if
such assets were sufficient to permit payment in full.
(b) For purposes of this Section 4, a distribution of assets in any
dissolution, winding up or liquidation shall not include (i) any consolidation
or merger of the Corporation with or into any other corporation, (ii) any
dissolution, liquidation, winding up or reorganization of the Corporation
immediately followed by reincorporation of another corporation or (iii) a sale
or other disposition of all or substantially all of the Corporation's assets to
another corporation; provided, however, that, in each case, effective provision
is made in the certificate of incorporation of the resulting and surviving
corporation or otherwise for the protection of the rights of the holders of
shares of the Series A Preferred Stock.
(c) After the payment of the full preferential amounts provided for herein
to the holders of shares of the Series A Preferred Stock or funds necessary for
such payment have been set aside in trust for the holders thereof, such holders
shall be entitled to no other or further participation in the distribution of
the assets of the Corporation.
Section 5. Conversion.
(a) Holders of shares of the Series A Preferred Stock shall have the right,
exercisable (subject to the provisions of Section 5(d)) at any time and from
time to time, to convert each share of Series A Preferred Stock into two hundred
and fifty shares of the Common Stock, subject to adjustment as described below.
Upon conversion, no adjustment or payment will be made for dividends, but if any
holder surrenders a share of the Series A Preferred Stock for conversion after
the close of business on the record date for the payment of a dividend and prior
to the opening of business on the payment date for such dividend, then,
notwithstanding such conversion, the dividend payable on such dividend payment
date will be paid to the registered holder of such share of the Series A
Preferred Stock on such record date.
(b) Any holder of a share or shares of the Series A Preferred Stock
electing to convert such share or shares shall deliver the certificate or
certificates therefor to the principal office of any transfer agent for the
Common Stock, with such form of notice of election to convert as the Corporation
shall prescribe fully completed and duly executed and (if such required by the
Corporation
B-2
or any conversion agent) accompanied by instruments of transfer in form
satisfactory to the Corporation and to any conversion agent, duly executed by
the registered holder or his duly authorized attorney, and transfer taxes,
stamps or funds therefor or evidence of payment thereof if required pursuant to
Section 5(c) hereof. The conversion right with respect to any such shares shall
be deemed to have been exercised at the date upon which the certificates
therefor accompanied by such duly executed notice of election and instruments of
transfer and such taxes, stamps, funds, or evidence of payment shall have been
so delivered, and the person or persons entitled to receive the shares of the
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder or holders of such shares of the Common Stock upon said date.
(c) If a holder converts a share or shares of the Series A Preferred Stock,
the Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of Common Stock upon the conversion. The holder, however,
shall pay to the Corporation the amount of any tax which is due (or shall
establish to the satisfaction of the Corporation payment thereof) if the shares
are to be issued in a name other than the name of such holder and shall pay to
the Corporation any amount required by the last sentence of Section 5(a) hereof.
(d) The Series A Preferred Stock shall not become convertible into shares
of Common Stock until such time as the number of shares of the Corporation's
authorized and unissued Common Stock equals or exceeds the aggregate number of
shares of the Common Stock into which all of the authorized shares of Series A
Preferred Stock would be convertible under Section 5(a) (without regard to this
sentence) if all of such shares of Series A Preferred Stock were outstanding.
Thereafter, the Corporation shall reserve and shall at all times have reserved
out of its authorized but unissued shares of the Common Stock sufficient shares
of the Common Stock to permit the conversion of the then outstanding shares of
the Series A Preferred Stock. All shares of Common Stock which may be issued
upon conversion of shares of the Series A Preferred Stock shall be validly
issued, fully paid and nonassessable. In order that the Corporation may issue
shares of the Common Stock upon conversion of shares of the Series A Preferred
Stock, the Corporation will endeavor to comply with all applicable Federal and
State securities laws and will endeavor to list such shares of the Common Stock
to be issued upon conversion on each securities exchange on which the Common
Stock is listed.
(e) The conversion rate in effect at any time shall be subject to
adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay a dividend in shares of the
Common Stock to holders of the Common Stock, (2) make a distribution in
shares of the Common Stock to holders of the Common Stock, (3) subdivide
the outstanding shares of the Common Stock into a greater number of shares
of the Common Stock or (4) combine the outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, the conversion
rate immediately prior to such action shall be adjusted so that the holder
of any shares of the Series A Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of the Common
Stock which he would have owned immediately following such action had such
shares of the Series A Preferred Stock been converted immediately prior
thereto. An adjustment made pursuant to this Section 5(e)(i) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision or combination.
B-3
(ii) In case the Corporation shall issue rights or warrants to
substantially all holders of the Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of holders
of Common Stock entitled to receive such rights or warrants and expiring
not more than 45 days after such record date) to subscribe for or purchase
shares of the Common Stock (or securities convertible into shares of the
Common Stock) at a price per share less than the current market price (as
determined pursuant to Section 5(e)(iv)) of the Common Stock on such record
date, the number of shares of the Common Stock into which each share of the
Series A Preferred Stock shall be convertible shall be adjusted so that the
same shall be equal to the number determined by multiplying the number of
shares of the Common Stock into which such shares of the Series A Preferred
Stock was convertible immediately prior to such record date by a fraction
of which the numerator shall be the number of shares of the Common Stock
outstanding on such record date plus the number of additional shares of the
Common Stock offered (or into which the convertible securities so offered
are convertible), and of which the denominator shall be the number of
shares of the Common Stock outstanding on such record date, plus the number
of shares of the Common Stock which the aggregate offering price of the
offered shares of the Common Stock (or the aggregate conversion price of
the convertible securities so offered) would purchase at such current
market price. Such adjustments shall become effective immediately after
such record date.
(iii) In case the Corporation shall distribute to all holders of the
Common Stock shares of any class of capital stock other than the Common
Stock, evidence of indebtedness or other assets (other than cash dividends
out of current or retained earnings), or shall distribute to substantially
all holders of the Common Stock rights or warrants to subscribe for
securities (other than those referred to in Section 5(e)(ii)), then in each
such case the number of shares of the Common Stock into which each share of
the Series A Preferred Stock shall be convertible shall be adjusted so that
the same shall equal the number determined by multiplying the number of
shares of the Common Stock into which such shares of the Series A Preferred
Stock was convertible immediately prior to the date of such distribution by
a fraction of which the numerator shall be the current market price
(determined as provided in Section 5(e)(iv)) of the Common stock on the
record date mentioned below, and of which the denominator shall be such
current market price of the Common Stock, less the then fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value) of the portion of the assets
so distributed or of such subscription rights or warrants applicable to one
share of the Common Stock. Such adjustment shall become effective
immediately after the record date for the determination of the holders of
the Common Stock entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the Corporation shall distribute rights or
warrants (other than those referred to in Section 5(e)(ii) ("Rights") pro
rata to holders of the Common Stock, the Corporation may, in lieu of making
any adjustment pursuant to this Section 5(e)(iii), make proper provision so
that each holder of a share of Series A Preferred Stock who converts such
share after the record date for such distribution and prior to the
expiration or redemption of the Rights shall be entitled to receive upon
such conversion, in addition to the shares of the Common Stock issuable
upon such conversion (the "Conversion Shares"), a number of Rights to be
determined as follows: (i) if such conversion occurs on or prior to the
date for the distribution to the holder of Rights of separate certificate
evidencing
B-4
such Rights (the "Distribution Date"), the same number of Rights to which a
holder of a number of shares of the Common Stock equal to the number of
Conversion Shares is entitled at the time of such conversion in accordance
with the terms and provisions of and applicable to the Rights; and (ii) if
such conversion occurs after the Distribution Date, the same number of
Rights to which a holder of the number of the Common Stock into which a
share of the Series A Preferred Stock so converted was convertible
immediately prior to the Distribution Date would have been entitled on the
Distribution Date in accordance with the terms and provisions of and
applicable to the Rights.
(iv) The current market price per share of the Common Stock on any
date shall be deemed to be the average of the daily closing prices for
thirty consecutive trading days commencing forty-five trading days before
the day in question. The closing price for each day shall be the last
reported sale price regular way or, in case no such reported sale takes
place on such date, the average of the reported closing bid and asked
prices regular way, in either case on the New York Stock Exchange, or if
the Common Stock is not listed or admitted to trading on such Exchange, on
the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the closing sale price of the Common
stock, or in case no reported sale takes place, the average of the closing
bid and asked prices, on NASDAQ or any comparable system, or if the Common
Stock is not quoted on NASDAQ or any comparable system, the closing sale
price or, in case no reported sale takes place, the average of the closing
bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose.
(v) In any case in which this Section 5 shall require that an
adjustment be made immediately following a record date, the Corporation may
elect to defer (but only until five business days following the mailing of
the notice described in Section 5(e)) issuing to the holder of any share of
the Series A Preferred Stock converted after such record date the shares of
the Common Stock and other capital stock of the Corporation issuable upon
such conversion over and above the shares of the Common stock and other
capital stock of the Corporation issuable upon such conversion only on the
basis of the conversion rate prior to adjustment; and, in lieu of the
shares the issuance of which is so deferred, the Corporation shall issue or
cause its transfer agents to issue due bills or other appropriate evidence
of the right to receive such shares.
(f) No adjustment in the conversion rate shall be required until cumulative
adjustments result in a concomitant change of 1% or more of the conversion price
as in effect prior to the last adjustment of the conversion rate; provided,
however, that any adjustments which by reason of this Section 5(f) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 5 shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.
No adjustment to the conversion rate shall be made for cash dividends.
(g) In the event that, as a result of an adjustment made pursuant to
Section 5(e), the holder of any share of the Series A Preferred Stock thereafter
surrendered for conversion shall become entitled to receive any shares of
capital stock of the Corporation other than shares of the Common Stock,
thereafter the number of such other shares so receivable upon conversion of any
shares of the Series A
B-5
Preferred Stock shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in this Section 5.
(h) The Corporation may make such increases in the conversion rate, in
addition to those required by Sections 5(e)(i), (ii) and (iii), as it considers
to be advisable in order than any event treated for Federal income tax purposes
as a dividend of stock or stock rights shall not be taxable to the recipients
thereof.
(i) Whenever the conversion rate is adjusted, the Corporation shall
promptly mail to all holders of record of shares of the Series A Preferred Stock
a notice of the adjustment and shall cause to be prepared a certificate signed
by a principal financial officer of the Corporation setting forth the adjusted
conversion rate and a brief statement of the facts requiring such adjustment and
the computation thereof; such certificate shall forthwith be filed with each
transfer agent for the shares of the Series A Preferred Stock.
(j) In the event that:
(1) the Corporation takes any action which would require an
adjustment in the conversion rate,
(2) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and
stockholders of the Corporation must approve the transaction, or
(3) there is a dissolution or liquidation of the Corporation,
a holder of shares of the Series A Preferred Stock may wish to convert some or
all of such shares into shares of the Common Stock prior to the record date for,
or the effective date of, the transaction so that he may receive the rights,
warrants, securities or assets which a holder of shares of the Common Stock on
that date may receive. Therefore, the Corporation shall mail to holders of
shares of the Series A Preferred Stock a notice stating the proposed record or
effective date of the transaction, as the case may be. This Corporation shall
mail the notice at least 10 days before such date; however, failure to mail such
notice or any defect therein shall not affect the validity of any transaction
referred to in clauses (1), (2) or (3) of this Section 5(j).
(k) If any of the following shall occur, namely: (i) any reclassification
or change of outstanding shares of the Common Stock issuable upon conversion of
shares of the Series A Preferred Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation or merger to
which the Corporation is a party other than a merger in which the Corporation is
the continuing corporation and which does not result in any reclassification of,
or change (other than a change in name, or par value, or from par value to no
par value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of the Common Stock or (iii) any sale or
conveyance of all or substantially all of the property or business of the
Corporation as an entirety, then the Corporation, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance,
provide in its certificate of incorporation or other charter document that each
share of the Series A Preferred Stock shall be
B-6
convertible into the kind and amount of shares of capital stock and other
securities and property (including cash) receivable upon such reclassification,
change, consolidation, merger, sale or conveyance by a holder of the number of
shares of the Common Stock deliverable upon conversion of such share of the
Series A Preferred Stock immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance. Such certificate of incorporation or
other charter document shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
5. The foregoing, however, shall not in any way affect the right a holder of a
share of the Series A Preferred Stock may otherwise have, pursuant to clause
(ii) of the last sentence of Section 5(e)(iii), to receive Rights upon
conversion of a share of the Series A Preferred Stock. If, in the case of any
such consolidation, merger, sale or conveyance, the stock or other securities
and property (including cash) receivable thereupon by a holder of the Common
Stock includes shares of capital stock or other securities and property of a
corporation other than the successor or purchasing corporation, as the case may
be, in such consolidation, merger, sale or conveyance, then the certificate of
incorporation or other charter document of such other corporation shall contain
such additional provisions to protect the interests of the holders of shares of
the Series A Preferred Stock as the Board of Directors shall reasonably consider
necessary by reason of the foregoing. The provision of this Section 5(k) shall
similarly apply to successive consolidations, mergers, sales or conveyances.
Section 6. Ranking. With regard to rights to receive dividends and
distributions upon dissolution of the Corporation, the Series A Preferred Stock
shall rank prior to the Common Stock and junior to any other Preferred Stock
issued by the Corporation, unless the terms of such other Preferred Stock
provide otherwise.
Section 7. Limitations. In addition to any other rights provided by
applicable law, so long as any shares of the Series A Preferred Stock are
outstanding, the Corporation shall not, without the affirmative vote, or the
written consent as provided by law, of the holders of at least a majority of the
outstanding shares of the Series A Preferred Stock, voting as a class, amend,
alter or repeal, whether by merger, consolidation or otherwise, any of the
provisions of the Certificate of Incorporation (including this Certificate of
Designation) that would change the preferences, rights or powers with respect to
the Series A Preferred Stock so as to affect the Series A Preferred Stock
adversely; provided, however, that (except as otherwise required by applicable
law) nothing herein contained shall require such a vote or consent in connection
with any increase in the total number of authorized shares of the Common Stock.
Section 8. No Preemptive Rights. No holder of shares of the Series A
Preferred Stock will possess any preemptive rights to subscribe for or acquire
any unissued shares of capital stock of the Corporation (whether now or
hereafter authorized) or securities of the Corporation convertible into or
carrying a right to subscribe for or acquire shares of capital stock of the
Corporation.
B-7
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by Salvatore J. Zizza, its President, and attested by
Robert A. Bruno, its Secretary, this ____ day of __________, 1997.
THE LEHIGH GROUP INC.
By: /s/ Salvatore J. Zizza
--------------------------
Name: Salvatore J. Zizza
Title: President
Attested:
By: ____________________
Name: Robert A. Bruno
Title: Secretary
B-8
Appendix C
Name of Subscriber: GENERALE DE SANTE INTERNATIONAL, PLC
SUBSCRIPTION AGREEMENT
First Medical Corporation
5200 Blue Lagoon Drive
Suite 250
Miami, Florida 33126
Gentlemen:
The undersigned ("Subscriber") hereby tenders this Subscription Agreement
("Agreement') subject to the terms and conditions set forth herein. If you are
in agreement, please indicate your acceptance by executing this Agreement in the
space provided and returning one executed counterpart to Subscriber. All
references to Subscriber shall include the Subscriber's nominee.
The closing of this transaction will not occur until such time as First
Medical Corporation, a Delaware corporation (the "Issuer"), consummates a
transaction in which it becomes a public company. Accordingly, the parties agree
that all documents to be executed in connection with the transaction described
herein shall be subject to the closing of a transaction in which the Issuer
shall become a public company. Simultaneously with the closing, the Issuer
agrees to register the Common Stock (as defined below) currently owned by
Subscriber and the Common Stock purchased by Subscriber hereby as described
herein.
1. Subscription
1.1 Subscriber hereby subscribes for and agrees to purchase a number
of shares of the Common Stock, $.01 par value (the "Common Stock"), of
First Medical Corporation, a Delaware corporation (the "Issuer"), equal to
10% of the issued and outstanding Common Stock of the issuer existing on
the date of the Closing of the transactions contemplated by this Agreement,
including the shares issued to Subscriber.
1.2 Subscriber hereby subscribes for and agrees to purchase such
amount of the 9% Series A Preferred Stock ("Preferred Stock") of the issuer
as shall be convertible into 10% shares of Common Stock issued and
outstanding as at the date of issue. The Preferred Stock issued to the
Subscriber shall form a class of shares of its own. The Preferred Stock
shall be issued to Subscriber and shall contain the terms and conditions
set forth in Exhibit "A" annexed hereto and made a part hereof by reference
and such other terms and conditions, if any, as issuer and Subscriber may
mutually agree upon in writing prior to the Closing of the transaction
contemplated by this Agreement. As set forth in Exhibit "A," the Preferred
Stock will pay a 9% cumulative annual dividend, payment of which will be
deferred until the earlier of (1) the third anniversary of the Closing and
(ii) the date of conversion into Common Stock, and will be convertible into
shares of Common Stock equal to 10% of the currently issued and outstanding
Common Stock on a fully diluted basis. There will be no new issue of Common
Stock during 1996.
C-1
1.3 Subscriber hereby subscribes for and agrees to purchase 49% of the
issued and outstanding shares of the Common Stock, $.01 par value (the
"WHEN Common Stock"), of WHEN Inc., a Delaware corporation and a
wholly-owned subsidiary of the Issuer ("WHEN"). The WHEN Common Stock
subscribed for hereby equals 49% of the issued and outstanding WHEN Common
Stock.
1.4 The purchase price for the Common Stock and Preferred Stock
purchased hereby is an aggregate of US$4,000,000. The purchase price for
the WHEN Common Stock purchased hereby is US$1,000,000.
1.5 The Issuer agrees that the proceeds from Subscriber's purchase of
the Common Stock, Preferred Stock and WHEN Common (collectively, the
"Securities") shall only be used by the Issuer for the purchase of capital
assets for WHEN and/or American Medical Clinics Development Corporation.
Limited, an Irish corporation ("AMCDC").
2. Restrictions on Transfer.
2.1 Subscriber acknowledges that is acquiring the Securities for its
own account and for the purpose of Investment and not with a view to any
distribution or resale thereof within the meaning of the Securities Act of
1933, as amended (the "Act"), and any applicable state or other securities
laws ("Other Securities Laws"). Subscriber further agrees that it will not
sell, assign or transfer any of the Securities so acquired in violation of
the Act or Other Securities Laws and acknowledges that, in taking
unregistered securities, it must continue to bear the economic risk of its
investment for an indefinite period of time because such Securities have
not been registered under the Act or Other Securities Laws. Subscriber
further acknowledges that such Securities cannot be transferred unless they
are registered under the Act and Other Securities Laws or an exemption from
such registration is applicable to such transfer.
2.2 Subscriber acknowledges that appropriate legends reflecting the
status of the Securities under the Act and Other Securities Laws will be
placed on the face of the certificates for such Securities at the time of
their transfer and delivery, including, without limitation, the following
restrictive legend:
"The Shares represented by this certificate have been
acquired directly or indirectly from the Issuer without
being registered under the Securities Act of 1933, as
amended, or any other applicable securities laws, and
are restricted securities as that term is defined under
Rule 144 promulgated under the Act. These shares may
not be sold, pledged, transferred, distributed or
otherwise disposed of in any manner ("Transfer") unless
they are registered under the Act and any applicable
securities laws, or unless the request for Transfer is
accompanied by a favorable opinion of counsel,
reasonably satisfactory to the Issuer, stating that the
Transfer will not result in a violation of the Act or
any applicable state securities laws."
C-2
2.3 Immediately following (i) a transaction in which the Issuer
becomes a public company and (ii) any conversion by Subscriber, the Issuer
agrees to register all shares of the Common Stock owned by the Subscriber
under the Securities Act of 1933, as amended (the "Act"), on a Form S-3 or
other appropriate form of registration. In addition, in the event that the
Issuer proposes to register any securities (the "Registration Shares")
under the Act, other than pursuant to a registration statement on Form S-4
or S-8, or any successor to such forms, for the purpose of the sale or
other transfer of the Registration Shares by Issuer, Subscriber shall have
the right to request the Issuer to include its shares of Common Stock
and/or Preferred Stock, as the case may be, in such registration under the
Act or any other securities laws; provided, however, that if such
registration is pursuant to an underwritten initial public offering and in
the written opinion of the Issuer's managing underwriter for such offering,
if any, the inclusion of all or a portion of the Subscriber's securities,
when added to the securities being registered by the Issuer and any selling
shareholder(s) of the Issuer other than the Subscriber, if any (the "Other
Stockholders"), will exceed the maximum number of the Issuer's securities
that can be marketed at the price that could otherwise be obtained or would
otherwise materially adversely affect the offering, then the Issuer may
first include i such registration all of the securities the Issuer proposes
to sell, and the number of the Subscriber's securities and the Other
Stockholders' securities that may be so included shall be allocated among
the Subscriber and the Other Stockholders pro-rata on the basis of the
number of shares that are requested to be registered by Subscriber and the
Other Stockholder(s). The parties hereto agree that the cost of
registration of Subscriber's securities shall be borne by the Issuer.
3. Covenants and Additional Agreements.
3.1 As set forth above, the shares of Preferred Stock being subscribed
for hereby shall be convertible into a number of shares of Common Stock
equal to ten percent of the issued and outstanding Common Stock of Issuer
as of the date of issuance.
3.2 Subscriber shall have the right to designate half of the members
of the board of directors of WHEN.
3.3 The Executive Committees of the Issuer and WHEN shall include its
Chairman of the Board, its Chief Executive Officer and a designee of
Subscriber (in the event Subscriber shall select such a designee) All
capital business investments (but not normal capital expenditures) shall be
approved only by a unanimous vote of their respective Executive Committees.
Meetings of the Executive Committees may be held by telephone, with
confirmation of votes by fax.
3.4 At any time within three (3) years following the Closing, the
Subscriber shall have the option to put the write of its shareholders in
WHEN to the Issuer for the consideration of an aggregate of US$1,000,000
and a sum equivalent to the fair market value of such shares. The fair
market value of such shareholdings shall be determined by a reputable
investment banking firm to be selected by the Issuer and the Subscriber. In
the event the parties cannot agree on an investment banker, the parties
shall each select a reputable investment banking firm and such investment
banking firms shall select a third reputable investment banking firm to
determine the fair market value of the WHEN Common Stock. The determination
of the third investment banking firm shall be binding upon the Issuer and
Subscriber.
C-3
3.5 In connection with the transactions contemplated hereby,
Subscriber shall sell to the Issuer, for consideration of US$1.00, an
amount equal to one percent of the shares of AMCDC. Alain Leilouche shall
become Chairman of the Board of AMCDC.
3.6 It is understood by the Issuer and the Subscriber that all
hospital management contractual agreements will be effected through WHEN.
3.7 At any time between the second and the fifth anniversary of the
Closing, Subscriber may acquire from WHEN that number of shares of WHEN
Common Stock as may be sufficient, together with the shares acquired
pursuant to this Agreement, to provide Subscriber with 52% of the issued
and outstanding common stock of WHEN, WHEN shall enter into a management
agreement with the issuer or its wholly-owned subsidiary or other designee,
pursuant to which WHEN pays such entity, for two years after such
acquisition, an annual management fee equal to the sum of WHEN's cost of
management and a reasonable success fee to be determined by the issuer and
the Subscriber. In the event that Subscriber acquires the additional 3% of
WHEN Common Stock, Issuer will receive from Subscriber, at the Issuer's
option, either (i) 10% of the Common Stock of FMC that was issued at the
Closing or (ii) US$3,000,000. Further, if Subscriber acquires the
additional 3% of the WHEN Common Stock, Subscriber will also have the
option to purchase at that time the remaining shares of WHEN Common Stock
at a price equal to its fair market value, as determined by one reputable
investment banking firm, to be selected by the Issuer and Subscriber. In
the event the parties cannot agree on an investment banker, the parties
shall each select a reputable investment banking firm who shall select a
third reputable investment banking firm to determine the fair market value
of the WHEN Common Stock. The determination of the third investment banking
form shall be binding upon the Issuer and Subscriber. If Subscriber
acquires all of the WHEN Common Stock, the management agreement described
in this Section 3.7 shall terminate.
3.8 Upon the Closing, the provision of that certain agreement dated
January 20, 1996, among the Issuer, the Subscriber and AMCDC relating to
the loan by Subscriber of US$1,200,000 shall terminate and be of no further
force and effect.
3.9 Subscriber may acquire from Issuer for US$1.00 consideration, that
number of shares of the Common Stock of AMCDC, par value of the AMCDC
Common Stock (the "AMCDC Common Stock") as may be sufficient, together with
the shares of AMCDC Common Stock already owned by Subscriber, to provide
Subscriber with 52% of the issued and outstanding AMCDC Common Stock.
3.10 At any time prior to the fifth anniversary of the Closing,
Subscriber shall have the option to acquire from the Issuer, for the price
of 110% of the average 30-day telling market price thereof, that number of
shares of Common Stock of the Issuer that, together with the shares of
Common Stock already held by Subscriber, shall equal 51% of the issued and
outstanding Common Stock of the issuer.
3.11 The Issuer and Subscriber agree that in exchange for the
Subscriber's termination of that certain option granted to Subscriber by
American Medical Clinics, Inc. ("AMC") and its successor entity American
Medical Centers Management Company, Inc., a wholly owned subsidiary of the
Issuer, which option entitles the Subscriber to purchase, at any time prior
to December 31, 1997, 10% of the issued and outstanding common stock of
AMC, the Issuer shall issue Subscriber a number of shares of Common Stock
equal to 5% of the issued and outstanding Common Stock of the issuer
C-4
existing immediately following the date of the Closing of the transactions
contemplated by this Agreement. Issuer agrees that the shares of Common
Stock issuable to the Subscriber pursuant to this Section 3.11 shall not be
diluted during the remainder of the year ended December 31, 1996, absent
agreement between the issuer and the Subscriber.
3.12 It is an essential term of this Agreement that Charles Pendola
will become Chief Executive Officer of Issuer and WHEN.
3.13 Subscriber shall have the right to designate three (3) members of
the Issuer's Board of Directors. Subscriber shall also have the right to
appoint a Deputy Chief Financial Officer to be employed by the Issuer, as
well as a Deputy Managing Director of WHEN, to be employed by WHEN.
4. Miscellaneous.
4.1 This Agreement shall be construed in accordance with and governed
by the laws of the State of Delaware.
4.2 The Closing shall take place at the offices of Patton & Boggs,
L.L.P., 2550 M Street, N.W. Washington, D.C. at 10:00 a.m. on the date
immediately following the consummation of a transaction in which the Issuer
becomes a public company or on such other date and place as Issuer and
Subscriber shall mutually agree. At the Closing of this Transaction, the
issuer shall deliver to the Subscriber duly executed stock certificates for
the Securities being subscribed for and the Subscriber shall deliver to the
Issuer, a certified or official bank check for the total subscription price
set forth above or shall wire such funds to an account designated by
Issuer.
C-5
IN WITNESS WHEREOF, the parties have caused this Subscription Agreement to
be executed by the officers thereunto duly authorized on the date first set
forth below.
SUBSCRIBER:
GENERALE DE SANTE INTERNATIONAL, PLC
By: /s/ Daniel Caille
----------------------------
Daniel Caille
Mailing Address: 4 Cornwall Terrace
London NW1 4QP ENGLAND
Date: June 11, 1996
Telephone: 011-44-071-486-1286
Fax: 011-44-071-486-9275
Accepted by:
ISSUER:
FIRST MEDICAL CORPORATION
By: /s/ Dennis A. Sokol
------------------------
Name: Dennis A. Sokol
Title: Chairman
Date: June 11, 1996
C-6
Appendix D
Generale de Sante International plc
3 April 1997
The Lehigh Group Inc.
810 Seventh Avenue
27th Floor
New York, New York 10019
Attn: Salvatore J. Zizza
First Medical Corporation
5200 Blue Lagoon Drive
Suite 250
Miami, FL 33126
Attn: Dennis A. Sokol
Dear Sirs:
Reference is made to the Subscription Agreement (the "Subscription Agreement")
dated June 11, 1996 between Generale de Sante International plc ("GDS") and
First Medical Corporation ("FMC") pursuant to which GDS will acquire shares of
common stock, $.01 par value per share, of FMC and shares of 9% Series A
Preferred Stock of FMC upon the closing (the "Closing") of the transactions
contemplated by the Subscription Agreement.
We understand that FMC and The Lehigh Company ("Lehigh") have entered into an
Agreement and Plan of Merger dated as of October 29, 1996, pursuant to which a
subsidiary of Lehigh will merge with and into FMC (the "Merger"). We further
understand that upon the consummation of the Merger, the Closing will occur and
GDS will acquire shares of common stock, $.001 par value per share ("Lehigh
Common Stock"), of Lehigh and shares of Series A Convertible Preferred Stock,
$.001 par value per share ("Lehigh Preferred Stock"), of Lehigh.
GDS hereby notifies FMC and Lehigh that the shares of Lehigh Common Stock,
Lehigh Preferred Stock and 9% Series A Preferred Stock of FMC to be acquired by
GDS at the Closing will be acquired, and will be held, as a passive investment
and that GDS will not currently exercise its right under the Subscription
Agreement to designate three directors to the Board of Directors of FMC or,
following the Merger and the Closing, the Board of Directors of Lehigh, as well
as its right to designate a member of the Executive Committee of each of FMC and
FMC Healthcare Services, Inc., a Deputy Chief Financial Officer of FMC and a
Deputy Managing Director of FMC Healthcare Services, Inc. GDS further notifies
FMC and Lehigh that GSD does not have any intentions, plans or proposals that
may relate to or would result in:
(a) Conversion of any shares of FMC 9% Series A Preferred Stock or Lehigh
Preferred Stock acquired upon consummation of the Merger and the Closing
into shares of Lehigh Common Stock;
D-1
(b) Exercise of its opinion under the Subscription Agreement to increase its
ownership interest in FMC [or Lehigh] to 51% of the issued and outstanding
shares of such company;
(c) Exercise of its right to designate three directors to the Board of
Directors of FMC [or Lehigh].
We would expect that Lehigh will disclose our intentions, as set forth above, in
any proxy or registration statement to be issued in connection with the Merger.
Very truly yours,
GENERALE DE SANTE INTERNATIONAL PLC
By: /s/ Guy Odi
------------------------------
Name: Guy Odi
Title: Company Secretary
D-2
Rider X
GDS has notified Lehigh that GDS intends that its ownership and voting interest
in Lehigh will be a passive investment and that GDS does not currently intend to
exercise its right to designate three directors to the Lehigh Board.
Rider Y
GDS has notified Lehigh, pursuant to a letter dated 3 April, 1997, that the
shares of Lehigh Common Stock, Lehigh Preferred and FMC 9% Series A Preferred
Stock to be acquired by GDS as the Effective Time will be acquired, and will be
held, as a passive investment and that GDS will not currently exercise its right
to designate three directors to the Lehigh Board, a member of the Executive
Committee of each of FMC and FMC Healthcare Services, Inc., a Deputy Financial
Officer of FMC and a Deputy Managing Director of FMC Healthcare Services, Inc.
Other than the transactions contemplated by the Merger Agreement (which was
negotiated and concluded without the participation of GDS), GDS does not have
any intentions, plans or proposals that may relate to or would result in:
(a) Conversion of the shares of FMC 9% Series A Preferred Stock or Lehigh
Preferred Stock to be acquired by GDS at the Effective Time into shares of
Lehigh Common Stock;
(b) Exercise GDS's option under step 4, to increase its ownership interest in
Lehigh to 51% of the issued and outstanding shares of Lehigh Common Stock;
(c) Exercise of GDS's right to designate three directors to the Lehigh Board.
D-3
Appendix E
FORM OF
PROVIDER AGREEMENT
1. Parties
This Provider Agreement ("Agreement") is entered into by and between:
a. The party designated on the Cover Sheet as "Provider" and, if said party
is a corporation or partnership, the Principals of said party, all of whom
are listed in the attached Ownership Disclosure Statement (Attachment A).
All of said persons and entities are collectively referred to herein as
"Provider"; and
b. Humana Medical Plan, Inc. and Humana Plan of Florida, Inc. (Florida
health maintenance organizations) and Humana Health Insurance Company of
Florida, Inc. (a Florida insurance company) and Humana Insurance Company
(an insurance company) and their affiliates. All of said companies are
severally referred to in this Agreement as "Humana".
2. Scope of the Agreement
This Agreement sets forth the rights, responsibilities, terms and
conditions governing Provider's status as a Participating Provider in certain
health care networks established by Humana and Provider's service to designated
covered individuals ("Members") by contracts issued or administered by Humana.
This Agreement applies only to those health care benefits contracts and to those
Members designated by Humana.
The joinder of the two companies under the designation "Humana" shall not
be construed as imposing joint responsibility or cross-guarantees. All rights
and responsibilities arising in respect to individual Members shall be
applicable to only the company which issued the contract covering the respective
Member ad may not be imposed on or enforced on the other company.
3. Medical Services to be Provided
Provider agrees to provide or arrange for covered health care services for
Members in accordance with Attachment B.
4. Use of Participating Providers
Provider shall admit or refer Members for covered services only to
providers designated or specially approved by Humana.
5. Provider Fees
Humana shall pay Provider in accordance with payment arrangement outlined
in Attachment C. Provider shall collect any copayment amount applicable to the
services provided. The payment from Humana plus the payments owed by Members
pursuant to their contract ("Copayments") shall be accepted by Provider as
payment in full for all Covered Services. If a health care benefits
E-1
contract permits any assignment of benefits to be made by Members to providers,
then Provider agrees to accept assignment of benefits made by Members, as
payment in full.
6. Coordination of Benefits; Recovery Rights
Covered services provided to each Member are subject to coordination or
subrogation with other benefits payable or paid to or on behalf of the Member,
and to Humana's rights of recovery in other party liability situations.
Physician shall accept payment from Humana, plus any Copayments, as payment in
full for all Covered Services provided to Members, and Physician hereby assigns
to Humana all Physician's rights to recover any other benefits that may be
payable in respect to a Member.
Physician agrees to use Physician's best efforts to determine the
availability of other benefits, including other party liability, and to obtain
any information or documentation required by Humana to facilitate Human's
collection of such other benefits.
7. Policies and Procedures
Provider agrees to abide by all quality assurance, utilization review,
credentialing and other policies and procedures established and revised by
Humana from time to time. Such policies and procedures are set out in the
Affiliated Provider Manual ("Manual"). Provider shall be notified of any
revisions to the policies and procedures and they shall become binding upon
Provider thirty (30) days after Humana has notified Provider. Any revisions
affecting Provider shall not be discriminatory and shall apply to all providers
similarly situated.
8. No Liability to Members for Charges
Provider hereby agrees that in no event, including, but not limited to
non-payment by Humana, Humana's insolvency or breach of this Agreement, shall
Provider bill, charge, collect a deposit from, seek compensation, remuneration
or reimbursement from, or have any recourse against Members of Humana or persons
other than Humana acting on their behalf for Covered Services provided pursuant
to this Agreement. This provision shall not prohibit collection of any
Copayments in accordance with the terms of this Agreement.
Provider further agrees that (1) this provision shall survive the
termination of this Agreement regardless of the cause giving rise to termination
and shall be construed to be for the benefit of the Member, (2) this provision
supersedes any oral or written contrary Agreement now existing or hereafter
entered into between Provider and Member or persons acting on their behalf, and
(3) this provision shall apply to all employees and subcontractors of Provider,
and Provider shall obtain from such persons written agreement to this provision.
An modification, addition, or deletion to Article 8 shall become effective
on a date no later than fifteen (15) days after the Commissioner of Insurance
has received written notice of such proposed changes.
E-2
9. Credentialing
Participation under this Agreement by Provider, and any Provider employee
or subcontractor, is subject to the satisfaction and maintenance, in Humana's
sole judgment, of all credentialing standards adopted under the policies and
procedures set out in the Manual.
10. Insurance
Provider agrees to maintain, at no expense to Humana, such policies of
comprehensive and general liability, professional liability and worker's
compensation coverage, with such carriers and in such amounts as Humana may
reasonably approve, insuring Provider, its members, employees, agents and
subcontractors (as applicable), against any claim or claims for damages arising
as a result of injury to property or person, including death, occasioned
directly or indirectly in connection with the performance of medial services
contemplated by this Agreement and/or the maintenance of Provider's facilities
and equipment. Upon request, Provider shall provide Humana with evidence of said
coverage, and Provider shall require the carrier(s) to provide Humana with
notice of any cancellations or modifications. This clause shall survive for a
period of time following the termination of this Agreement not less than the
Statute of Limitations applicable to personal injury in this State.
11. Malpractice Claims
Providers shall within forty-eight (48) hours, or such lessor period of
time as required by the applicable statute of this State notify Humana in
writing of notice of any Member claim alleging malpractice or the occurrence of
any incident which is required to be reported under such statute.
12. Standards of Professional Practice
Provider agrees to provide Members with medical services which
are within the normal scope of Provider's medical practice. These services shall
be made available to Members without discrimination and in the same manner as
provided to Provider's other patients. Provider agrees to provide medical
services to Members in accordance with the prevailing practices and standards of
the profession and community.
13. Medical Records
Unless otherwise provided in this Agreement Provider shall maintain and
retain records relating to Members in such form as required by law and accepted
medical practice. Humana or any federal or State regulatory agency, as permitted
by law, may obtain copies and have access to any medical, administrative or
financial record of Provider related to covered services provided by Provider to
any Member upon request. This clause shall survive any termination of this
Agreement.
14. Use of Provider's Name
Humana shall have the right to include the following information in any and
all marketing and administrative materials it distributes: Provider name,
telephone number, address, hours of operation, type of practice or specialty,
and the names of all physicians providing care at Provider's facility.
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15. Duration of Agreement
This Agreement shall be effective only if and when Humana has separately
notified Provider of its acceptance of Provider's application. Duration of
Agreement shall be defined as outlined in Attachment D.
16. Grievance Procedure
Provider agrees to cooperate and participate with Humana in its grievance
procedure, and Provider will comply with all final determinations made through
the grievance procedure.
17. Assignment and Delegation
This Agreement is entered into to secure the personal services of Provider.
Accordingly Provider may not assign or delegate all or any part of this
Agreement without the prior written consent of Humana. Humana may assign this
Agreement to any purchaser of all or a substantial portion of the book of
business in respect of which this Agreement is executed or to any affiliate of
Humana provided that the assignee agrees to assume Humana's obligations under
this Agreement.
18. Entire Agreement
This Agreement, including the Application, Cover Sheet, Manual, the
Attachments hereto and the documents incorporated herein, constitutes the entire
Agreement between Humana and Provider with respect to the subject matter hereof,
and it supersedes any other medical services Agreement oral or written, between
Humana and Provider.
19. Relationship
Nothing contained in this Agreement shall be deemed to create any
relationship between Provider and Humana other than that of independent
contractors. This Agreement is not intended for the benefit of any third
parties. Notice to, or consent from, any third party, including a Member or
other provider, shall not be required in order to make any termination or
modification of this Agreement effective.
20. Waiver
Waiver, whether expressed or implied, of any breach of any provision of
this Agreement shall not be deemed to be a waiver of any other provision or a
waiver of any subsequent breach of the same provision.
21. Litigation
In the event of any litigation arising out of or related to this Agreement,
the prevailing party shall be entitled to recover from the other party its
reasonable attorney fees and costs of litigation including, without limitation,
any expert witness fees.
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22. Severability
If any part of this Agreement should be determined to be invalid,
unenforceable, or contrary to law or professional ethics, that part shall be
reformed, if possible, to conform to law and ethics, and if reformation is not
possible, that part shall be deleted, and the other parts of this Agreement
shall remain fully effective.
23. Right to Injunction
In the event of an actual or threatened breach of this Agreement, Humana
shall be entitled to an injunction enforcing this Agreement in addition to all
other remedies available at law.
24. Liquidated Damages
Provider acknowledges that Humana has invested and will invest substantial
resources including funds, time, effort and goodwill in building a roll of
Members to be treated by Provider. Therefore, Provider or any of Provider's
employees, principals or financially related entities, shall not solicit,
persuade, induce, coerce or otherwise cause the disenrollment of any Member at
any time. If any Member disenrolls from Plan to be treated by Provider or any of
Provider's employees, principals, or a financially related entity under some
other prepaid financial arrangement other than Plan within six (6) months of
disenrollment, the Provider shall pay to Humana the amount of $1,200.00 (ONE
THOUSAND TWO HUNDRED DOLLARS) for each such Member who is treated by Provider or
any of Provider's employees, principals, or any financially related entity.
Provider hereby agrees that this amount constitutes liquidated damages and is
not a penalty, inasmuch as the actual damages are not ascertainable at the time
of the execution of this Agreement. Provider understands that the liquidated
damages clause does not apply to or require payment from the Members in any
circumstance. Humana agrees with Provider that this provision shall not apply to
any Member who disenrolls and is treated by Provider or anyone else on a
non-prepaid and non-capacitated fee-for-service basis as a private patient. In
addition, Members who were patients prior to Provider's participation as a
Humana affiliated Provider, will be excluded from this provision, if Provider
can furnish documentation thereof acceptable to Humana. Provider has the
obligation to immediately notify Humana of the name of any Member or former
Member treated by Provider or any other person covered by this provision within
ten (10) days of the first (1st) day of treatment. This clause shall survive
termination or expiration of this Agreement for a period of six (6) months
regardless of cause giving rise to termination.
25. Off-Set
Provider authorizes Humana to deduct monies that may otherwise be due and
payable to Provider from any outstanding monies that Member may, for any reason,
owe to Humana.
26. No Third Party Beneficiaries Rights
The parties have not created and do not intend to create by this Agreement
any rights and any third parties under this Agreement, including, but not
limited to, Members. The parties acknowledge and agree that there are no third
party beneficiaries to this Agreement.
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27. Notices
Any notice, except notices of changes in policies and procedures pursuant
to Article 7, required or desired to be given under this Agreement shall be in
writing and shall be delivered in person or mailed by Certified or Registered
Mail, postage pre-paid return receipt requested, to the other party at the
address set forth below their respective signatures to this Agreement. Except as
provided in Article 7, any such notice shall be effective upon receipt. Unless a
notice specifically limits its scope, notice to any one party included in the
term "Provider" or "Humana" shall constitute notice to all parties included in
the respective term.
28. Incorporation of Attachments
Attachments A, B, C, D, E, F, G and H are made a part of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
____ day of _______, 199_. It is provided, however, that Humana's execution of
this Agreement shall not constitute the acceptance required to make this
Agreement effective pursuant to Article 9.
HUMANA
Humana Medical Plan, Inc.
By: /s/ illegible
--------------------------------
Title: V.P. & Gen. Mgr.
Humana Health Plan of Florida, Inc.
By: /s/ illegible
------------------------------
Title: _____________________________
Humana Health Insurance Company of Florida, Inc.
By: /s/ illegible
--------------------------------
Title: _____________________________
Humana Insurance Company
By: ____________________________
Title: ____________________________
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Address for Notice:
Humana Health Care Plan
5401 W. Kennedy Blvd., Suite 800
Tampa, FL 33609
PROVIDER
By: _________________________________
Title: _________________________________
PRINCIPALS OF PROVIDER
______________________
______________________
______________________
______________________
______________________
______________________
______________________
Address for Notice:
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ATTACHMENT B
SERVICES TO BE PROVIDED TO MEMBERS
ASSIGNED TO PRIMARY CARE PROVIDERS
Provider agrees to provide or arrange for Covered Services to Members who
have been assigned to Provider by Humana. Provider further agrees not to close
their practice to new Members without prior written approval of Humana and will
accept Members who are assigned to the Provider without discrimination or
screening of such Members based upon their health status.
Covered Services are those services provided under health benefit plans or
health care contracts offered, underwritten, or administered by Humana, as
specified in the Manual. Covered Services include the services of Primary Care
physician(s) who will provide physician services in the medical office(s) listed
in Attachment F ("Center").
Physician services shall include but not necessarily be limited to: medical
and surgical services, including anesthesia; diagnostic tests and procedures
that are a part of treatment; other services ordinarily furnished in the
physician office, such as x-ray ordered as part of treatment; services of the
physician's office nurse; drugs and biologicals that cannot be
self-administered; transfusions of blood and blood components; and medical
supplies.
Provider is responsible twenty-four (24) hours a day, seven (7) days a week
for providing or arranging all Covered Services including prescribing, directing
and authorizing all other care to Members who have been assigned to Provider.
Provider shall provide to Humana upon request a written description of
Provider's coverage arrangements for emergency and urgent care and service
coverage in the event of Provider unavailability due to vacation, illness, or
after hours. Provider will ensure that all physicians providing coverage are
contracted and credentialed physicians with Humana. Provider will also ensure
that the physician providing coverage renders services under the same terms and
conditions and in compliance with all provisions of this Agreement.
In the event that emergency and urgent care services are needed by a Member
outside the service are, the Provider shall monitor and authorize the
out-of-area care and shall provide direct care as soon as the Member is able to
return to the service area for treatment without medically harmful or injurious
consequences.
C. Provider shall be capitated for the provision of these services as
specified in Attachment
In the even that Provider terminates from participation in the Plan,
Provider shall continue Members medication therapy until the Member has been
evaluated by the new Primary Care physician, and physician has had reasonable
opportunity to review or modify Member's medication therapy.
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SERVICES TO BE PROVIDED TO MEMBERS NOT
ASSIGNED TO A PRIMARY CARE PROVIDER
For Members under health benefit or health care contracts offered,
underwritten, or administered by Humana where Members are not assigned to a
primary care provider, Provider agrees to provide all physician services offered
by Provider to such Members. Provider shall be compensated for the provisions of
these services as specified in Attachment C.
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ATTACHMENT C
PAYMENT ARRANGEMENTS FOR MEMBERS
ASSIGNED TO PROVIDER'S CENTER
COMMERCIAL MEMBERS
Humana agrees to pay Provider for Covered Services provided to Commercial
Members who have been assigned to Provider's Center, according to the payment
arrangement set forth below.
1. Part A Fund
A Part A Fund shall be established which will consist of the "Part A
Revenue," "Part A Expenses," and "Claims Reserve Fund." The fund shall be
calculated as follows:
Part A Revenue
An amount equal to the product of the capitation for each age/sex category
listed on Exhibit C-1, Commercial Capitations (column titled "HOSP"), multiplied
by the number of Members in each category, will be credited to the Part A Fund
as "Part A Revenue."
Part A Expenses
An amount equal to the claim paid by Humana, plus a calculated amount for
claims incurred but not reported or paid (IBNR) for Part A Expenses, will be
charged to the Part A Fund as "Part A Expenses."
Part A Expenses include, but are not limited to, costs identified for
inpatient hospital medial and surgical services, inpatient hospital psychiatric
services, selected outpatient surgery procedures at Humana contracted
facilities, skilled nursing home services, and home health care services. Part A
Expenses also include the Supplemental Benefits capitation, the cost of the Stop
Loss Pool (as specified in Section 5 below) and other Covered Services or costs
which may be determined to be Part A Expenses by Humana in the normal course of
business.
Claims Reserve Fund
The balance of the Claims Reserve Fund is determined by multiplying the Per
Capita Reserve Amount by the number of Commercial and individual Members
currently assigned to the Provider, and is adjusted on a monthly basis. The Per
Capita Reserve Amount is calculated by dividing the total claims paid, pending,
or incurred during the prior three months of operation, by the Provider's total
Commercial and individual enrollment for the same period.
Surpluses from the Provider's Part A Fund are paid into the Claims Reserve
Fund each month until the Claims Reserve Fund balance is reached. The Claims
Reserve Fund shall be used to pay for any Part A Expenses which are not covered
by the Part A Fund. Any funds remaining upon termination of this Agreement shall
be shared equally between Provider and Humana.
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Part A Revenue, less Part A Expenses shall be calculated on a monthly
basis, beginning with the fourth month of this Agreement. If the calculation
reflects a positive balance, then the balance is a surplus. The surplus shall be
credited towards the Claims Reserve Fund balance, and any net surplus exceeding
the Claims Reserve Fund balance shall be shared equally between Provider and
Humana. The Provider's share of the net surplus shall be paid to the Provider on
or about the last day of the month following the calculation above.
If the calculation reflects a negative balance, then the balance is a
deficit. Fifty-percent of the deficit shall be absorbed by Humana and
fifty-percent of the deficit shall be payable by Provider to Humana.
2. Part B Fund
A Part B Fund shall be established to pay for Part B Expenses. The fund
shall be calculated as follows:
Part B Revenue
An amount equal to the product of the capitation for each age/sex category
listed on Exhibit C-1, Commercial Capitation (column titled "REF"), multiplied
by the number of Members in each category; plus,
An amount for Supplemental Benefits as listed on Exhibit C-1 (column titled
"Drug" and "Vision"), multiplied by the number of Members who have selected such
supplemental benefits, will be allocated to the Part B Fund as "Part B Revenue."
Part B Expenses
An amount equal to the claims paid by Humana, plus a calculated amount for
claims incurred but not reported or paid (IBNR) for Part B costs which Humana is
expected to pay; plus
An amount allocated to the Stop Loss Pool, plus
An amount allocated to the Maternity Pool, will be charged to the Part B
Fund as "Part B Expenses."
Part B Expenses are all costs for Covered Services not defined as Part A
Expenses. Part B Expenses include, but may not be limited to, hospital based
physician fees, specialists fees, hospital outpatient services and supplemental
benefits costs.
Part B Revenue, less Part B Expenses, shall be calculated on a monthly
basis, beginning with the fourth month of this Agreement. If the calculation
reflects a positive balance then the balance is a surplus. One Hundred Percent
(100%) of the surplus shall be credited to the Provider on a monthly basis. If
the monthly calculation reflects a negative balance, then the balance is a
deficit. One Hundred Percent (100%) of the deficit amount will be owed by
Provider to Humana.
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3. Payment of Surpluses or Deficits
At the close of each month, any Part A and/or Part B surpluses shall be
offset by any Part A and/or Part B deficits. Any resulting net surplus shall be
paid to the Provider on or about the end of the following month. Any resulting
net deficit shall be paid to Humana upon notification by Humana of such
deficits.
4. Primary Care Capitation
The Primary Care Capitation paid to Provider for Physician Services, will
be mailed on or about the 15th day of each month, and will consist of the
following:
An amount equal to the product of the capitation for each age/sex category
on Exhibit C-1, Commercial Capitation (column titled "PCP"), multiplied by the
number of Members in each category.
5. Stop Loss Pool
A Stop Loss Pool shall be maintained to pay for Part A and Part B Expenses
incurred by a Member after having reached the threshold amount in any one
calendar year. Threshold amounts are defined in the Manual.
Claims paid from the Maternity Pool shall not be considered expenses for
purposes of the Stop Loss Pool, and shall not be included in the calculation.
The per member per month costs of the Stop Loss Pool shall be charged to
the Part A Fund and Part B Fund on a pro-rata basis. The initial per member per
month rate for a new Provider will be the rate in effect on the effective date
of this Agreement. The rate will adjust for all Providers at the same time.
Humana retains the right to purchase Reinsurance coverage with the funds
from the Stop Loss Pool for the purposes described above.
6. Maternity Pool
A Maternity Pool shall be maintained to cover the cost of all Part A Fund
and Part B Fund maternity expenses (as defined in the Manual). The per member
per month cost of the Maternity Pool shall be charged to the Provider's Part A
Fund and Part B Fund on a pro-rata basis. The initial per member per month rate
for a new Provider will be the rate in effect on the effective date of this
Agreement. The rate will adjust for all Providers at the same time.
Humana retains the right to purchase Reinsurance coverage with the funds
from the Maternity Fund Pool for the purposes described above.
7. Other Pools
Provider agrees to participate in any other Stop Loss or Risk Sharing-type
Pool that Humana may create from time to time that, in Humana's sole judgment,
helps ensure the financial
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viability of the Health Care Network. Provider will be notified at least 20 days
in advance of any changes in the Stop Loss Pool or other Risk Sharing-type Pool.
8. Capitation Adjustments
The per member per month rates used to calculate Part A Revenue, Part B
Revenue, Supplemental Benefits Capitation or Primary Care Capitation, may be
adjusted from time to time to reflect the changes made in the rates paid to
Humana for Commercial and individual Members, changes in benefits offered to
Members by Humana or any other business reasons.
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MEDICARE MEMBERS
Humana agrees to pay Provider for Covered Services provided to Members who
have been assigned to Provider, according to the payment arrangement set forth
below:
1. Part A Fund
A Part A Fund shall be established which will consist of the "Part A
Revenue," "Part A Expenses," and "Claims Reserve Fund." The fund shall be
calculated as follows:
Part A Revenue
An amount equal to the product of the capitation for each age/sex category
listed on Exhibit C-2, Medicare Capitation (section A titled "Medicare Part A
Capitation"), multiplied by the number of Members in each category, will be
credited to the Part A Fund as "Part A Revenue."
Part A Expenses
An amount equal to the claim paid by Humana, plus a calculated amount for
claims incurred but not reported or paid (IBNR) for Part A Expenses, will be
charged to the Part A Fund as "Part A Expenses."
Part A Expenses include, but are not limited to, costs identified for
inpatient hospital medical and surgical services, inpatient hospital psychiatric
services, selected outpatient surgery procedures at Humana contracted
facilities, skilled nursing home services, and home health care services. Part A
Expenses also include the Supplemental Benefits capitation, the cost of the Stop
Loss Pool (as specified in Section 5 below), and other Covered Services or costs
which may be determined to be Part A Expenses by Humana in the normal course of
business.
Claims Reserve Fund
The balance of the Claims Reserve Fund is determined by multiplying the Per
Capita Reserve Amount by the number of Medicare Members currently assigned to
the Provider, and is adjusted on a monthly basis. The Per Capita Reserve Amount
is calculated by dividing the total claims paid, pending, or incurred during the
prior three months of operation, by the Provider's total Medicare enrollment for
the same period.
Surpluses from the Provider's Part A Fund are paid into the Claims Reserve
Fund each month until the Claims Reserve Fund balance is reached. The Claims
Reserve Fund shall be used to pay for any Part A Expenses which are not covered
by the Part A Fund. Any funds remaining upon termination of this Agreement shall
be shared equally between Provider and Humana.
Part A Revenue, less Part A Expenses shall be calculated on a monthly
basis, beginning with the fourth month of this Agreement. If the calculation
reflects a positive balance, then the balance is a surplus. The surplus shall be
credited towards the Claims Reserve Fund balance, and any net surplus exceeding
the Claims Reserve Fund balance shall be shared equally between Provider and
Humana. The Provider's share of the net surplus shall be paid to the Provider on
or about the last day of the month following the calculation above.
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If the calculation reflects a negative balance, then the balance is a
deficit. Fifty-percent of the deficit shall be absorbed by Humana and
fifty-percent of the deficit shall be payable by Provider to Humana.
2. Part B Fund
A Part B Fund shall be established to pay for Part B Expenses. The fund
shall be calculated as follows:
Part B Revenue
An amount equal to the product of the capitation for each age/sex category
listed on Exhibit C-2, Medicare Capitation (section B titled "Medicare Part B
Referral Capitation"), multiplied by the number of Members in each category;
plus,
An amount for Supplemental Benefits as listed on Exhibit C-2 (section D
titled "Medicare Supplemental Benefits Capitation"), multiplied by the number of
Members who are eligible for Medicare, Part A.
Part B Expenses
An amount equal to the claims paid by Humana, plus a calculated amount for
claims incurred but not reported or paid (IBNR) for Part B costs which Humana is
expected to pay; plus
An amount allocated to the Stop Loss Pool.
Part B Expenses are all costs for Covered Services not defined as Part A
Expenses. Part B Expenses include, but may not be limited to, hospital based
physician fees, specialists fees, hospital outpatient services and supplemental
benefits costs.
Part B Revenue, less Part B Expenses, shall be calculated on a monthly
basis, beginning with the fourth month of the Agreement. If the calculation
reflects a positive balance then the balance is a surplus. One Hundred Percent
(100%) of the surplus shall be credited to the Provider on a monthly basis. If
the monthly calculation reflects a negative balance, then the balance is a
deficit. One Hundred Percent (100%) of the deficit amount will be owed by
Provider to Humana.
3. Payment of Surpluses or Deficits
At the close of each month, any Part A and/or Part B surpluses shall be
offset by any Part A and/or Part B deficits. Any resulting net surplus shall be
paid to the Provider on or about the end of the following month. Any resulting
net deficit shall be paid to Humana upon notification by Humana of such
deficits.
4. Primary Care Capitation
The Primary Care Capitation paid to Provider for Physician Services, will
be mailed on or about the 15th day of each month, and will consist of the
following:
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An amount equal to the product of the capitation for each age/sex category
on Exhibit C-2, Medicare Capitation (section C titled "Medicare Primary Care
Provider Capitation"), multiplied by the number of Members in each category.
5. Stop Loss Pool
A Stop Loss Pool shall be maintained to pay for expenses incurred by a
Member after having reached the threshold amount. The threshold amount is
defined in the Manual. The per Member per month rate for a new Provider will be
the rate in effect on the effective date of the contract and will be revised for
all Providers at the same time. Humana retains the right to purchase reinsurance
coverage for these purposes.
6. Other Pools
Provider agrees to participate in any other Stop Loss or Risk Sharing-type
Pool that Humana may create from time to time that, in Humana's sole judgment,
helps ensure the financial viability of the Health Care Network. Provider will
be notified at least 30 days in advance of any changes in the Stop Loss Pool or
other Risk Sharing-type Pool.
8. Capitation Adjustments
The per member per month rates used to calculate Part A Revenue, Part B
Revenue, Supplemental Benefits Capitation or Primary Care Capitation, may be
adjusted from time to time to reflect the changes made in the rates paid to
Humana for Commercial and individual Members, changes in benefits offered to
Members by Humana or any other business reasons.
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PAYMENT ARRANGEMENT FOR MEMBERS NOT ASSIGNED TO PROVIDER
1. Humana P.P.O. and other non-assigned Members (except Medicare Supplement
Members)
As of the Effective Date, for those Members who are under health benefit or
health care contracts offered, underwritten, or administered by Humana where
Members are not assigned to Provider, Provider agrees to provide all physician
services offered by Provider. Provider agrees to accept as payment in full from
Humana seventy percent (70%) of the Medicare Allowable or Provider's Fee
Profile, whichever is less, less any co-payments and deductibles due from such
Members for physician services provided to such Members (the "Fee for Service
Payment Method").
2. Humana Medicare Supplement Members
As of Effective Date, Provider also agrees to bill the Medicare
intermediary, for Humana supplemental benefit plans where Humana's coverage
supplements the basic coverage of another carrier or third party payor. Provider
agrees to accept the basic coverage as payment in full.
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ATTACHMENT D
DURATION OF AGREEMENT
This Agreement shall continue for a term of five (5) years from the
effective date, unless terminated as provided in this Agreement.
Provider may terminate this Agreement for cause if Humana fails to make
payments required under this Agreement, but only after written notice and
providing at least sixty (60) days in which Humana may avoid termination by
curing the default in payment. Any dispute concerning the amount of payment owed
shall be resolved according to the procedures specified in the Manual.
Humana may terminate this Agreement for cause if Provider fails to carry
out any term or condition of this Agreement or has otherwise defaulted under
this Agreement, after thirty (30) days written notice, or Humana may elect to
impose optional procedures in lieu of termination of this Agreement, as
specified in this Attachment D.
Humana may terminate this Agreement immediately upon written notice,
stating the cause for such termination, in the event Humana reasonably
determines that (i) Provider's continued participation under this Agreement may
adversely affect the health, safety or welfare of any Member or bring Humana or
its health care networks into disrepute, (ii) or Provider engages in or
acquiesces to any act of bankruptcy, receivership or reorganization, (iii) or
Humana loses its authority to do business. Humana may also terminate this
Agreement immediately if it loses authority to conduct any limited segment of
its business, but only as to that segment.
Humana may elect to terminate this Agreement upon sixty (60) day written
notice, if Provider's cumulative Part A/Part B deficits, for three consecutive
months, exceeds those months' cumulative Primary Care Capitation by 100%.
"Cumulative" Deficit is defined as the amount of the deficit after offset
payments (offset provisions are defined in Clause 25). "Cumulative" Primary Care
Capitation is defined as the Provider's capitation amount for Primary Care
Services net any offset payments or withholds. Termination may be delayed or
waived. Waiver for termination for any given period would not waiver termination
rights for succeeding periods.
Provider agrees that he will not alter his referral patterns for
non-Members as a result of entering into this contract or as a result of Humana
entering into any contract with any other practitioner (herein the "Referee").
If the percentage of Provider's non-Members referred to a Referee declines by
greater than 10% during any six (6) month period compared with the percentage
referred prior to the Referee's Effective Date, and if the Referee also
contracts to furnish services to Members, then Humana may, at its option,
terminate this Agreement upon sixty (60) days notice unless Provider shall
submit evidence satisfactory to Humana that the change in referrals to the
Referee was for a cause other than Referee's entering into a contract with
Humana.
Either party may elect to terminate this Agreement without cause after the
first two (2) years upon giving six (6) months written notice. In addition, this
Agreement may be terminated by mutual written consent of both parties at any
time.
Any termination of this Agreement (except immediate terminations) by either
party, shall become effective at the end of a month. Upon termination, Provider
agrees to provide medical services
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to any Member hospitalized on the date of termination until the date of
discharge, or until Humana has made arrangements for substitute care. Humana
agrees to pay for such covered services in accordance with Attachment C.
Provider understands that termination of this Agreement shall not relieve
Provider from Provider's obligation to provide, or arrange and pay for Covered
Services to Members through the last day of this Agreement. Humana retains the
right to recover from Provider any costs paid on Provider's behalf which are
obligations of Provider and become necessary to be paid by Humana to maintain
the health care delivery network.
Compliance with Florida Statutes - As required under Florida Statute
Section 641.234, as amended, effective October 1, 1988, if the Department of
Insurance has information and belief that this Agreement requires Humana Medical
Plan, Inc. and/or Humana Health Plan of Florida, Inc. ("Humana") to pay a fee
which is unreasonably high in relation to the services provided, after review of
this Agreement, the department may order Humana to cancel this Agreement if it
determines that the fees to be paid by Humana or as compared with similar
contracts entered into by other health maintenance organizations in similar
circumstances, such that this Agreement is detrimental to the subscribers,
stockholders, investors, or creditors of Humana. The issuance of such an order
by the Florida Department of Insurance will not affect the termination of the
entire Agreement which shall remain in full force and effect with respect to
Humana Health Insurance Company of Florida, Inc. and Humana Insurance Company
and product lines contemplated in the Agreement to which this Amendment is made
a part.
As required under Florida Statute Section 641.315, Provider shall provide
sixty (60) days advance written notice to Humana at the address listed in the
"Notices" section of this Agreement, and to the Department of Insurance, Bureau
of Specialty Insurers, 200 East Gaines Street, Tallahassee, Florida 32399-0300,
before canceling this Agreement with Humana for any reason. Nonpayment for goods
or services rendered by Provider to Humana or any of its Members shall not be a
valid reason for avoiding such 60-day advance notice of cancellation. Upon
receipt by Humana of a 60-day cancellation notice, Humana may, if requested by
the Provider terminate the contract in less than sixty (60) days if Humana is
not financially impaired or insolvent.
Humana and Provider hereby acknowledge and agree that the provisions stated
in the previous paragraph do not relieve the Provider of any of its other
obligations under this Agreement that are not inconsistent with the foregoing,
including without limitation any obligation Provider has to provide more than
sixty (60) days notice of cancellation of this Agreement, to Humana.
Any change (including any addition and/or deletion) to any provision or
provisions of this Agreement that is required by duly enacted federal or Florida
legislation, or by a regulation or rule finally issued by a regulatory agency
pursuant to such legislation, rule or regulation, will be deemed to be part of
this Agreement without further action required to be taken by either party to
amend this Agreement to effect such change or changes, for as long as such
legislation, regulation or rule is in effect.
Optional Procedures in Lieu of Termination
If, upon Humana's determination that Provider has breached this Agreement
or is not abiding by any policy or procedure specified in this Agreement, the
Manual, or other publication by which Provider has been notified of such policy
or procedure, Humana may elect to implement a remedial
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plan under which the Provider will have a reasonable period of time to comply
with the provisions of this Agreement. This "Corrective Action Plan" is
specified in the Manual.
Humana may also immediately implement a procedure to restrict new Members
at Provider's Medical Center. This procedure will continue until such time as
Humana determines that Provider has corrected the default and may then take
additional Members.
If, as a result of Provider's untimely payment to any Participating
Provider which Provider is obligated to pay directly, the services of Members
are disrupted, Humana may, at its sole discretion, immediately implement a
procedure in lieu of termination whereby Humana will pay such providers and
deduct the payment from any monies due and owing by Humana to Providers. This
procedure will continue until such time as Humana determines that the Provider
is able to resume payment to these providers without disruption of services.
This shall not relieve the Provider's obligation to pay Participating Providers.
Provider understands that Humana has no obligation to implement the
Optional Procedures specified above in lieu of termination, and that such option
does not waive any rights under this Agreement.
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ATTACHMENT E
Section 1 - Health Care Delivery Network/Participating Providers
Section 2 - Provider's Facility
Section 3 - Advertising and Marketing
Section 4 - Conflicts of Interest
Section 5 - Medical Records
Section 6 - Access to Information
SECTION 1
HEALTH CARE DELIVERY NETWORK - PARTICIPATING PROVIDERS
Except as otherwise provided in this Agreement, Provider shall admit or
refer Members to those hospitals, specialists and other health care
professionals, hereinafter "Humana Participating Providers," with whom Humana
has contracted as part of its Health Care Delivery Network. These Humana
Participating Providers are listed in the Manual and may change from time to
time. Humana shall pay the Humana Participating Providers directly at a
pre-negotiated capitation payment or fee-for-service payment on behalf of the
Provider for appropriately referred services, and these payments shall be
charged to the appropriate account of the Provider, as described in Attachment
C.
Provider may substitute their own Participating Provider with another of
their own choosing after having first obtained written approval of Humana, such
approval shall not be unreasonably withheld. Provider shall obtain written
agreement from these Participating Providers after Humana has approved such
agreements and Participating Providers have been credentialed by Humana. Humana
will pay these participating providers directly as described above.
Provider understands and agrees that no physician or other health
professional or facility shall be permitted to provide services to Humana
Members which have not been credentialed by Humana. Provider agrees to replace
any physician or other health professional who has been decredentialed by Humana
within a reasonable period of time after Provider has been notified in writing
of such decredentialing, with a provider who has been credentialed by Humana.
Provider understands that, from time to time, other providers' agreement
will expire or be terminated, and that Members will be transferred to Provider's
Center. Provider agrees to honor existing Health Care Delivery Network contracts
covering Members which have been transferred into Provider's Center, until such
time as those contracts can be terminated.
SECTION 2
PROVIDER'S FACILITY
Provider is, or will be providing health care services at the facility
location listed on the attached Attachment F. This facility is known as the
Provider's "Center." Provider agrees not to change
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the location where services are provided to Members, or to add any new
locations, without the prior written approval of Humana. Similarly, Provider
must obtain Humana's prior written approval before closing any location.
Provider will establish regular business hours for the provision of services to
Humana Members. In establishing business hours, Provider should take into
consideration the number and type of Members assigned to the facility. The
proposed business hours listed on Attachment F are subject to approval by
Humana. This does not relieve Provider of its obligation to provide 24-hour per
day medical coverage for Members.
SECTION 3
ADVERTISING AND MARKETING
Provider may participate in the generation of Membership through marketing
and advertising only after obtaining prior written approval of Humana. Provider
will not advertise or utilize any marketing materials, logos, tradenames,
servicemarks, or other materials created or owned by Humana, or make reference
to Humana without Humana's written consent. Provider shall not acquire any right
or title in or to the marketing materials, logos, tradenames, service marks, or
other materials of Humana, the same shall remain at all times the exclusive
property of Humana.
Provider agrees to install appropriate signage promoting Humana both
outside and inside its facility, subject to limitations in Provider's lease or
local ordinance. Such signage must be approved by Humana and will be installed
at Provider's expense. Provider further agrees to display marketing materials
provided by Humana inside the facility. Upon request by Humana and within ten
(10) working days, Provider agrees to remove any such signage and materials from
exterior or interior of its facility, as the case may be, and either deliver or
destroy same in accordance with the instructions of Humana.
Provider agrees not to send written communication to Provider's Members,
other than that provided for in the manual, without the prior review and
approval by Humana.
SECTION 4
CONFLICT OF INTEREST
Provider hereby represents and warrants that, except as disclosed on
Attachment G, Provider, including all Principals of Provider, shall not be
interested, directly or indirectly, in any manner, as a contractor, partner,
officer, director, shareholder, advisor, employee, or in any other capacity, in
any other health maintenance organization, prepaid health plan, or similar
entity providing prepaid health services, hereafter referred to as a
"Competitive Plan."
Provider agrees that Provider has a continuing obligation to notify Humana
of any changes in Attachment G.
Provider is not permitted to contract or affiliate with any Competitive
Plan which offers a Medicare HMO product which will be provided to members of
the Competitive Plan at the same facility where services are provided to Members
of Humana. Provider may contract or affiliate with a Competitive Plan which
offers a Medicare HMO product which will be provided to members of the
Competitive Plan at a facility which is not affiliated with Humana and which is
a reasonable distance from the Provider's facility under this Agreement.
Provider may contract or affiliate with a Competitive Plan which does not offer
a Medicare HMO product at any facility.
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Humana reserves the right to determine which Competitive Plans offer
Medicare HMO products and to prohibit Provider from contracting or affiliating
with such plans at the facility under this Agreement, or at facilities within a
reasonable distance from this facility.
Provider represents and warrants that neither Provider, nor any employee or
agent of Provider, shall solicit or otherwise attempt to induce, directly or
indirectly, any Members to disenroll from Humana or to enroll in any Competitive
Plan. It shall be deemed conclusively that Provider has breached this
representation and warranty if a Member disenrolls from Humana, and within six
(6) months thereafter, or six (6) months following any termination of this
Agreement, whichever shall occur first, said Member enrolls in a Competitive
Plan in which Provider is interested, directed or indirectly.
Provider agrees to identify any and all facilities and agencies (e.g. Lab,
X-ray, Nursing Home or Home Services agency, etc.) where Provider refers
patients and where Provider has an ownership or financial interest. Provider
will make such disclosure at time of contract execution and thereafter whenever
ownership or financial interest in a facility or agency is obtained.
Except in the case of death or legal incompetence, Provider represents and
warrants that there shall be no change in ownership without Humana's approval,
and such approval shall not be unreasonably withheld. Any such change in
ownership is subject to the limitations of Assignment and Delegation specified
in Article 17 of this Agreement. In the event a change of ownership occurs as a
result of the death or legal incompetence of one of the Principals, Provider (or
its personal representative) shall notify Humana of any such change or impending
change within fifteen (15) days of the date of death or petition for a judgment
of incompetence.
SECTION 5
MEDICAL RECORDS
Provider shall maintain and retain records on behalf of Humana relating to
Members in such form as required by law and accepted medical practice. Humana
shall be the owner of such records and may obtain, copy, have access to, or
cause to be transferred any and all medical, administrative or financial records
related to the covered services provided by Provider to any Member upon request.
Provider agrees to transfer the original medical record of any Member who has
transferred to another Provider for any reason, including termination of this
Agreement, upon request by Humana or the Member. The transfer of medical records
shall be at no cost to either Humana or the Member. Provider agrees to pay court
costs or legal fees necessary for Humana to enforce the terms of this Section 5.
This Section 5 shall survive the termination of this Agreement for any reason.
SECTION 6
ACCESS TO INFORMATION
Provider agrees Humana or its designee shall have access and an opportunity
to thoroughly examine Provider's facilities, books, records and operations at
any time. Further, Humana or its designee shall have access and an opportunity
to thoroughly examine at any time facilities, books, records and operations of
any related organization or entity. Related organization or entity shall be
defined as (1) having influence or ownership or control and (2) either a
financial relationship or a relationship for rendering of services. Purpose of
such requirement is to permit Humana the right to assure compliance with all
financial, operational, quality assurance, as well as, any and all other
obligations required of Provider under this Agreement or the Manual.
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Failure by any person or entity involved, including Provider, to comply
with any requests for access, above mentioned, within ten (10) business days of
receipt of notification will be considered a breach of contract.
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